US Adspend to Rebound, But Growth to 2005 Slowing

06 August 2001

US adspend is due to rebound next year, but faces a general slowdown in growth to 2005, according to the fifteenth annual communications industry forecast from investment banker Veronis Suhler.

Following last year’s dotcom-driven boom, when adspend leapt 11.1%, expenditure is predicted to fall 1.1% in 2001, “as advertisers reduce their budgets in the wake of the economic downturn and dotcom shakeout.”

Although next year looks more positive, with a forecast increase in adspend of 6.9%, the period 2000–2005 will see average yearly growth of 4.9%, little over half the 8.9% for the previous five years.

A similar pattern is predicted for the communications industry as a whole, including marketing services, direct mail and the purchase of books, magazines and videos. This sector grew by an average of 7.9% (the second fastest in the economy) in 1995–2000, a figure set to drop to 5.5% (the sixth fastest) in 2000–2005, due to “a slower-growing economy, slower growth in advertising expenditures and tamer consumer spending.”

“In the context of five years of incredible boom times in the national and communications economy it’s pretty hard to replicate these growth rates, with some exceptions,” declared the firm’s executive vp James P Rutherfurd. “It looks like for the industry as a whole it’s steady-as-you-go growth, with pockets of high growth and pockets of slower growth.”

Areas due for higher-than-average expansion include cable (forecast to grow 9.1% per year from 2000 to 2005, becoming the largest sector of the communications industry), outdoor advertising (7.6% per year), the internet (7.3%) and sponsorship (9.4%).

Those set to suffer especially slow growth include books (2.4%), consumer magazines and newspapers (3.7% each) and broadcast television (3.1%).

Growth in consumer spending is also expected to slow, from 7.8% a year in 1995–2000 to 5.4% in 2000–2005, though expenditure on the internet is expected to jump an average of 9.6%.

In a worrying sign for marketers, Veronis Suhler also found that consumers are accessing media with significant advertiser backing (broadcast TV, newspapers, magazines) less than they used to. In 1995, consumers spent 69.3% of their time with such media, a figure that fell to 60% in 2000 and is forecast to drop to 57.2% in 2005.

“Over time, people are spending more and more time with the media they buy themselves,” continued Rutherfurd. “Advertisers are going to have to fight harder and harder for attention in an increasingly cluttered world, even before they fight for attention among themselves.”

News source: New York Times