Forecast: A good but not great 2014

This year will be a good one for ad spending.

But it won’t be as strong as it had appeared earlier this year.

An updated forecast from IPG’s Magna Global slashes its prediction for advertising revenue this year from growth of 6 percent to 5.1 percent. Excluding Olympics and political spending, the media economy will grow 3.5 percent, down from the earlier prediction of 3.9 percent.

That’s still a healthy rate, and faster than the past few years. But the downgrade reflects lower-than-expected ad spending in second quarter, which was up 2 percent, less than half the 4.6 percent gain in first quarter.

“Despite the dip in advertising spending growth during the second quarter, we anticipate ad demand to pick up in the second half,” says Vince Letang, director of global forecasting.

The outlook for 2015 is even brighter.

“As the economy improves and consumption finally strengthens, the US ad market will enjoy its strongest year-over-year growth in 10 years (4.9 percent) to reach a new all-time high ($172 billion),” says Letang.

Second quarter’s problems were precipitated by a sudden drop in consumer spending during first quarter, which many economists say was tied to the severe weather in the U.S. that kept people indoors and out of retail outlets.

By the time advertisers adjusted to the consumer spending cutbacks, it was second quarter. A number of media took a hit.

TV, the biggest advertising category, got socked particularly hard. The Big Five broadcast networks saw ad sales slide by 9 percent during second quarter, following a 1 percent increase in first quarter tied to the Winter Olympics.

“The mediocre performance of network TV was a combination of flat pricing (a soft scatter market) and poor ratings performance: The four main broadcast networks showed average primetime ratings down, ranging from -4 percent (ABC) to -22 percent (Fox) with an overall average of -12 percent,” notes the report.

Ad spending grew at a slower pace because of the continued shift of money to cheaper digital options, too.

Advertisers who were buying television last year during the spring shifted money to digital video, which costs much less. Those advertiser spent fewer dollars to reach the same number of people.

Print also took a second-quarter hit. Newspaper revenue was off 9.5 percent, and magazines were down 11.6 percent.

Radio fell 4.7 percent. Even out of home, which has seen reliable, steady growth over the past few years, was flat in second quarter.

Still, the second half of the year should be stronger, with political spending heating up and digital continuing to grow at a fast clip, up 17.4 percent.

“Many factors point towards isolated and circumstantial causes behind the second quarter slow-down, including the delayed market response to the first quarter economic dip,” says the report.

“For that reason we are not significantly changing our forecast for the next two quarters and we are still expecting decent advertising growth on a full-year basis in 2014.”

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