First-quarter gains were below expectations, but outpaced growth in the rest of the economy.
Posted Jun 1, 2005
Total advertising expenditures for first-quarter 2005 increased 4.4 percent, to $33.5 billion, compared to the same time period in 2004, according to a report released today by advertising and marketing information provider TNS Media Intelligence (TNS). It's the smallest gain since the end of 2003, but spending continues to grow at a faster rate than that of the rest of the economy (and has for 10 of the past 11 quarters). Steven Fredericks, TNS president and CEO, says, "We forecast the full year to be 5.1 percent, so 4.4 for the first quarter isn't particularly horrible." The company will unveil a new yearly forecast on June 28.
"We probably expected a higher number because the first-half forecast was 6.9," Fredericks says. "Advertisers were fiscally more cautious given the mixed economic indicators, wavering consumer confidence,...and consolidation among telecommunications and retailers."
Local magazines led all media categories in percentage growth, rising 26.2 percent to $104 million. Cable TV grew 18.2 percent to $3.5 billion, taking market share from broadcast television. Sunday magazines climbed 14.5 percent to $398 million and consumer magazines increased by 9.5 percent to $4.7 billion. Internet advertising continued to rise, posting an 8.2 percent increase over the previous year to $1.9 billion. By total dollar amount, local newspapers and network television led all media at $5.9 billion and $5.8 billion respectively.
The report shows a growth in advertising spending in most of the 10 top categories by industry in the first quarter compared with the same time period in 2004, with an overall increase of 4.9 percent to $14.3 billion. Direct response led all categories, rising 19.3 percent to $1.5 billion. That was followed by a 12.6 percent increase in media and marketing services to $1.1 billion, and an 11.9 percent growth in restaurants to $1.1 billion. Other categories showing growth include domestic auto (8 percent); telecommunications (5 percent); banking and investment services (2.7 percent); retail clothing and department stores (1.9 percent); and transportation and tourism (1.5 percent). The only areas without growth were non-domestic autos, and the retail home furnishings and appliances category.
"I look at this simply. Products and services need to be in front of the consumer," Fredericks says. "It's not an issue of spending on advertising, it's how much will they be spending. They're spending more than last year. The real question for advertisers is where are they going to be putting the advertising, what media are they going to be going to," he says. "You have to start thinking about Where am I going to get the biggest bang for the buck? Unfortunately, there's not way to track what advertising medium they saw that drove them into a store to buy. It's still an art, as opposed to a science."
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