Goldman Says Ad Growth Slowing

By: Jennifer Saba Newspaper advertising growth continues to slow down, according to a report released today by Goldman Sachs. Fourth-quarter revenues grew 4.3%, below the previous quarter's increase of 5.4%. Q1 growth is estimated to be 4%.

The investment firm was nicely surprised by the uptick in retail advertising revenues in Q4, particularly in December. However, classified and national revenues are decelerating. National has been choppy, and the slowdown in classified is "troubling because this category was a key driver of industry performance in 2004." Classified revenue in Q4 rose 6%; in Q3 it grew 6.6%, and in Q2 it increased 8.2%. Auto continues to drag on the category.

With weak national and auto, coupled with the potential drop off of advertising resulting in recent mergers and acquisitions, like Federated-May deal, Q1 is pacing snail-like. The report said a soft January is worrisome because "comparisons are easy and comparisons get tougher as the quarter progresses." Circulation revenues, expected to be flat in 2005, won't take up the slack. Therefore, Goldman Sachs predicts total industry revenue to grow about 3.7%.


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