Ad Growth May Speed Up In '94 p. 22

By: George Garneau

After modest gains in 1993, ad forecasters and newspaper execs
are predicting larger increases in ad spending this year sp.

AFTER MODEST GAINS last year, advertising forecasters and newspaper company executives predicted larger, but still not booming, gains in ad spending in 1994.
While hoping that fourth quarter 1993 momentum would build this year ? and put a stake in the heart of a four-year slump from which the industry fitfully has been trying to escape, newspaper companies took nothing regarding the economy for granted. They were budgeting conservatively, assuming little if any economic improvement.
U.S. advertising fell short of most forecasts in 1993, but its approximate 5.2% growth exceeded inflation.
Improving economic trends late in the year contributed to greater optimism about 1994 among advertising and newspaper executives who addressed a crowd of financial analysts at the annual PaineWebber Media Conference in New York in December.
Robert Coen, senior vice president and forecaster at the New York ad firm McCann-Erickson, predicted that total U.S. ad spending would grow 6.3% this year to $146.8 billion, thanks to help from an improving economy, the Winter Olympics and added political advertising.
"The media marketplace seems to be firming up," he said.
Assuming that the U.S. economy expands at the same 2.8% pace as last year, Coen predicted that spending on local newspaper advertising would increase 6.5% this year to $30.1 billion. That compares with a 4.2% gain in 1993 ? the first time in five years that newspaper ad growth outpaced inflation, which was rated about 2.9% last year.
"The U.S. advertising outlook for 1994 is clearly brighter than it has been for years," he said. The restructuring that has delayed the ad rebound typical after recessions "appears to have been completed, and the long-awaited post-recession boom . . . could be about ready to appear."
Coen said historical trends pointed to even larger 1994 gains, but he forecast conservatively because recent trends "have been noticeably different from those of the past, and caution suggests that instead of a boom next year, we should more realistically look for moderately better results."
Ad spending in 1993 fell short of his prediction of a 6.9% gain, he said, because the economy failed to perform as expected. Similarly, his year-ago forecast that local newspaper ad spending would rise 8%, ahead of all other media, significantly overshot the 4.2% pace.
National advertising, after a 5.6% gain in 1993, will increase 6.5% this year to $85.5 billion, according to Coen's forecast, and spending by national advertisers on print will grow 5.8%, slower than all other media categories.
Local advertising ? newspaper, broadcast and Yellow Pages ? will accelerate to 6.1% this year, after a 4.6% increase in 1993, Coen forecast. Radio is expected to lead in local ad growth with 9% and Yellow Pages to trail at 2%.
Newspapers in many markets will see substantial gains, and some could see real booms, he said.

Less optimistic

Less optimistic ? and, he said, more accurate in his pessimism during the past few years ? was John Perriss, chairman and CEO of Zenith Media Worldwide. He predicted that, adjusted for inflation, advertising in North American major media ? including national and local advertising but excluding direct mail and Yellow Pages ? would finish 1993 only 0.2% higher and would decline 0.4% in 1994.
"We do not see any great bounce back," he said. The growth of new media, such as in-store promotions, has a "depressing effect" on advertising in traditional media, he added.
As for newspapers, Knight-Ridder Inc. marketing vice president Jerry Tilis said, "The stage may be set for good things to happen."
He called for retail ad spending in newspapers to increase 4% to 5% in 1994, national to gain 3% to 4% and classified to advance 5% to 6%. Zoned preprints will grow faster, he said.
With fewer business failures, consolidations and layoffs affecting companies that advertise in newspapers, he said, "I have to really put on my most creative hat to conjure up a doom-and-gloom scenario."
Tilis pointed to trends that bode well for newspapers: new cooperation in the quest to regain national advertising, regional newspaper ad networks, consumers rejecting national brands and possible growth in health advertising when the nation overhauls its health care system.
His forecast a year earlier proved fairly accurate: 1993 newspaper retail ad spending growth of 3% was within his prediction as was the 5% gain in classified. Only on national ad spending in newspapers was he overly optimistic: Instead of growing 3%, it declined 1% to 2%.
Miles Groves, vice president and chief number cruncher at the Newspaper Association of America, expected newspaper ad spending would end 1993 4% higher than in 1992, accelerating this year to "the 6% range."
Preliminary figures showed newspaper ad spending up 3.3% in the first nine months of 1993, and several newspaper companies reported that fourth-quarter results showed strong gains.
Meanwhile, Veronis, Suhler & Associates Inc., a New York-based investment banker specializing in media companies, has forecast that ad spending in all communications businesses will grow 4.1% in 1993 and 7.2% in 1994.
Ad spending in daily newspapers, after five years of less than 1% annual growth, will gain an average of 5.4% a year through 1997, starting with a rebound from 2.2% in 1993 to 6.1% this year, and ad spending in weeklies will rise 3.1% in 1993 and 4.2% this year, the report said.
"The modest growth that newspaper advertising did achieve in 1992 occurred in the latter part of the year and should carry over into 1993," company president John Suhler said earlier in 1993. "However, we are not looking for a return to even midsingle-digit growth rates until 1994."