Merrill Revises Ad Forecast Up

By: E&P Staff Merrill Lynch raised its ad growth forecast for 2005 (excluding direct mail) to 4.8% from 4.6%, according to a report released today. The reason for the revise: strength in online advertising.

Traditional media's share of the pie will continue to slow. Newspapers are expected to pick up 18% of total advertising dollars in 2005. In 1970 the share was 30%. In 1980 it was 27.5%. In 1990 it was 25%.

The report also noted that advertising and marketing is now considered more of a cost center than an investment -- a move from past thinking: ?The internal pressure to watch costs has not lifted, suggesting that advertising is likely to continue to grow in line with GDP.? Why does this matter? Because historically, advertising growth outpaced the GDP's growth.

Because they have to watch the bottom line, companies want to measure return on investment while limiting budget increases. As a result, spending will continue to shift away from traditional media, i.e. newspapers, magazines, TV, and towards cable and Internet. Still, the report points out that there are ?no cliffs on the horizon? for traditional media.


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