US Ad Spend Slows

Wall Street researchers are downgrading the U.S. and worldwide outlook for advertising spending in 2006. However, the new findings indicate the way ad spend inflation relates to economic inflation is changing.

by Kristina Knight

The Merrill Lynch researchers say for the first time, overall economic inflation is ahead of advertising rate inflation.

"Interestingly, advertising growth seems to be tracking real [gross domestic product] growth instead of nominal GDP growth, as it did in the past plus some," writes Merrill Lynch ad industry analyst Lauren Rich Fine (via MediaPost) in a report released Thursday. Fine goes on to say that the findings support the Merrill Lynch research that increased competition is putting pressure on advertising rates. This is being seen especially in online spending.

While other areas of advertising are seeing lower numbers, online advertising is growing. "A strong first half has helped buoy growth for this medium this year with acceleration in certain online formats such as branded and classifieds," the Wall Street analysts report.

New research from TNS Media Intelligence shows Verizon led online advertisers in August spending, spending nearly $13,000. Also in the Top 20 were NetFlix ($10,230), Monster ($8,876), LendingTree.com ($7,278) and Classmates.com ($6,849). In additional to traditional online ads, marketers are beginning to buy mobile ads, game and video on demand.

Merrill Lynch says with the drop in spending, the online ad spend in the U.S. will grow only 4.9%, down from the original forecast of 5.1% growth. Worldwide, ad spending is expected to grown only 4.3%.