1. The Ad Spending Rebound U.S. Market Analysis for 2002-06
John Rose Principal, Media, and Advertising Practice
Comments - observations?
Global Insight
November 25, 2002

2. Executive Summary
After a disastrous 2001 and mixed 2002, there is good news for the media sector.
Although the economy may be sluggish, 2003 will be an outstanding year for media companies as advertising recovers.
Corporate profits, solid retail sales, and growing consumer incomes will all contribute to a strong 2003.
Advertising expenditures will grow from $228 billion in 2002 to $285 billion in 2006.
All media types will gain with strong growth in Internet, cable, and radio.
There will be a shift in the coming years to new sources of growth for advertising – away from retail and consumer products and towards services.
The largest media markets will all experience growth. However, performance will vary widely.
11/11/2018

3. The U.S. outlook - important factors in the ad spend market
Positive factors
Sustained spending for key U.S. consumer categories
Disposable income continues to rise
Ad pricing and delivery costs have plateaued
FCC review of ownership caps
Negative factors
Telecom, technology, and the Internet are not coming back to past levels of ad spending
Potential for sluggish recovery of corporate profits
Overcapacity in selected media and markets
11/11/2018

4. Key drivers for ad spend
Corporate profits - profits drive ad spending, particularly for national level campaigns. Broadcast TV is particularly vulnerable to ad spend shifts driven by corporate profits.
Retail sales – this drives ad sales at the local level. Retail has particular relevance to cable, radio, newspaper, and direct mail.
Consumer disposable income - this drives uptake for all media types, but most importantly basic and premium or "value-added" Internet and cable services.
While not directly relevant to ad spend revenue, faster uptake means a bigger audience, which translates into to an opportunity to charge higher rates to advertisers. Consequently, a boost to disposable income will eventually mean stronger ad pricing and net revenues - cable and Internet being the lead gainers.
11/11/2018

5. The key trends for U.S. ad spend
Global Insight forecasts for key ad drivers
Growth in profits: %
2002 –5.7% % %
Retail sales growth: % % % %
Disposable income growth: % % % %
2003 is the breakout year.
Ad spend will strengthen in 2003, as corporate profits rebound and gain momentum in 2004 as retail sales accelerate.
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6. National outlook – U.S. advertising expenditure
2003 is the breakout year holds up well as profits, retail sales,
and disposable income move ahead.
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7. Ad spend growth by media type 2001 to 2006
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8. National advertising expenditures 2001 and 2006
Cable - Relatively strong growth will lead to a modest increase in overall share, but not profitability.
The Internet - expands quickly, but does not become a major component of total ad spend.
Newspaper – Share is eroded as other media capture new market opportunities.
Broadcast - The sector is in decline in terms of ad spend share. There is significant downside risk on the current share forecast.
Radio - Industry consolidation continues to pay off. Radio will hold up well in local markets and capture increased national ad spend.
Other
Newspapers
Internet
Magazines
2001
Cable TV
Broadcast TV
Radio
Direct Mail
11/11/2018

9. Top U.S. sources of advertising expenditures… a shift toward services
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10. Top metro area markets for media growth
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