Ad Spending Is Sluggish
Spanish TV, Web Show Most Growth
By Linda Moss -- Multichannel News, 12/10/2006 7:00:00 PM
Lagging behind projections, total U.S. ad spending in the first nine months of 2006 increased an estimated 4%, to $108.4 billion, with Spanish-language TV and the Internet posting the largest gains, according to data collected by TNS Media Intelligence.
Total ad expenditures during the third quarter alone were up 3.8% versus the same period last year, TNS reported.
There have been some sizable sector gains on the advertising front during the first three quarters of 2006. Spanish-language TV, receiving a kick from the World Cup, saw a 19.1% increase in ad spending to $3.22 billion, while Internet display advertising registered a 17.9% gain, to $7.15 billion, for the nine-month period.
Elsewhere, spot TV, propelled by third-quarter political advertising from midterm Congressional elections and gubernatorial races, advanced 6.3%, to $11.95 billion.
CABLE IS TEPID
Cable TV — which includes 44 national networks that are tracked by TNS — was among the media sectors that have been soft this year.
Cable-network ad spending was up just 3.3%, to $12.1 billion, compared with the same nine-month period in 2005.
Network TV finished the period with $16.65 billion in expenditures, up 3.8%.
Overall ad spending so far this year is below what TNS had forecast, according to Steven Fredericks, CEO of the data provider.
“Our forecast for the first nine months was 4.5% [growth], so it came in slow,” he said. “Third-quarter growth was 3.8%. The forecast that we had for the third quarter was 4.6%. So it's clearly slowing down more than we had expected it to.”
Fredericks cited two reasons for the “sluggishness” in ad spending. First, he said, the Gross Domestic Product is slowing down, coming in at 2.2% for the third quarter instead of the expected 2.5%.
“The second factor is a big drag on the market has been the reduced automotive spending,” he said. “The automotive category has pulled back about $1.2 billion in the past 12 months … It's $1.2 billion less, which is about 1% of the total advertising market in the United States.”
Automotive ad spending has been declining for five consecutive quarters, and this year, the drop has taken a toll on cable networks, Fredericks said.
“The automotive [pullback] is a big deal,” he said. “The automotive factor probably hits cable the hardest because the numbers are so large there.”
AUTO SPENDING SKIDS
Domestic-auto spending dropped 11.3% in the first nine months, to $5.58 billion.
General Motors, for example, followed a second-quarter $270 million reduction in ad spending with a cutback of $188 million in the third quarter, according to TNS.
“It's a little bit of chicken and egg for [U.S. car makers],” Fredericks said. “If the sales aren't going, do you spend more [on advertising], or do you have to cut spending?”
The cable sector has also been impacted by a decline in ad spending on news networks, according to Fredericks.
“The news networks are continuing to be a drag on this sector,” he said. “The ad revenue for news networks is down 5.9% year-to-date.”
In the first nine months, local newspapers saw expenditures for their print editions fall by 3.7%, to $17.5 billion. Radio media also lagged, down a combined 1.1% to an aggregate of $8.09 billion.
Ad dollars are moving from those two traditional types of media to the Internet, Fredericks said, adding: “Where we see that shifting coming from, it becomes obvious, is from newspapers and radio, because that has been declining.”
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