Dear reader, I found this article and thought it was very interest. My goal is to I find research that will assist you in making the right decisions regarding advertising and communications revenues. Enjoy.--Don.

Newspapers are finding that their Web sites, like this one for the News & Observer in North Carolina, are producing more of their ad revenue.

Troubling ’07 Forecast for the Old-Line Media but Not for the Online

By STUART ELLIOTT
Published: NEW YORK TIMES December 5, 2006

THE first Monday in October is known in legal circles as the start of the Supreme Court term. Similarly, on Madison Avenue, the first Monday in December has become familiar as the kickoff of the advertising forecast season.

And yesterday a flood of forecasts indeed flowed from analysts and agencies, all generally pointing to a challenging year ahead for the traditional media along with substantial growth for all things online.

(For those wondering why early December brings the predictions, it is because two brokerage firms, Credit Suisse and UBS, have long held their annual media conferences in the first week of the month. Other firms schedule the release of their forecasts at the same time, to ride the coattails of the competing conferences.)

Most forecasters are predicting growth in ad spending in the United States next year of 2 to 5 percent over 2006. That would represent a decline from the rate of growth in ad spending this year compared with 2005, which is expected to finish in the range of 3 to 6 percent. But it is not bad considering that 2007 will be missing two major events that help administer a hypodermic to ad budgets in even-numbered years: Olympics and national elections.

“You normally see a real drop-off in a non-Olympics, non-election year,” said Robert J. Coen, senior vice president and forecasting director at Universal McCann in New York, who opened the UBS conference.

Rather, Mr. Coen said, he believed that more marketers next year would increase ad budgets as they decide to “start turning their attention back to long-term communications” from a focus on cost-cutting.

Still, reactions to the predictions for 2007 depend upon the perch from which they are considered. Those in the traditional media like television and newspapers will no doubt frown after hearing that most forecasters expect at best flat growth in ad spending for them.
Those who sell ads on Web sites, on the other hand, are likely to be beaming at the high double-digit percentage gains being predicted for them.

“The trend that will continue to affect the media universe in 2007 is the ongoing shift in advertising dollars from traditional media into nontraditional media, most notably the Internet,” Fitch Ratings concluded in an outlook report.

Television, radio and newspapers will “experience slow growth and ongoing audience declines,” according to the report, “and ad spending continues to follow consumer patterns.”

For instance, the Newspaper Association of America is predicting that spending for ads on the Web sites of newspapers will increase a robust 22 percent next year from 2006. But ad spending in the print editions of those newspapers in 2007 will be flat, the association is forecasting, pulled down by a decline in classified advertising and no growth in demand from national advertisers.

An analyst for Credit Suisse, Debra Schwartz, questioned in a report whether even the prediction for an anemic gain of 1.2 percent was “too optimistic.”

A forecast from the Morton-Groves Newspaper Newsletter, issued last week, may be pessimistic enough for her. The publication predicted that ad spending in newspapers next year will fall 2 percent from 2006, a bigger decline than the 1.8 percent it is forecasting for this year compared with 2005.

(For ad spending on newspaper Web sites, the newsletter predicted an increase in 2007 of 23.3 percent from this year, coming after a gain of 34 percent it is forecasting for 2006.)
James Conaghan, vice president for business analysis and research at the newspaper association, offered a reason for the upbeat outlook for newspaper Web sites.

In a test recently started by Google to sell advertisements that appear in the print versions of 50 major newspapers, “the ad volume placed in the newspapers in the first three weeks has exceeded Google’s expectation for the entire three months of the test,” Mr. Conaghan said at the UBS conference.

“The advertisers and the publishers are also satisfied with the results,” he added.
Gordon Borrell, chief executive at Borrell Associates, who spoke with Mr. Conaghan, suggested that “10 years out, many newspaper Web sites could be as large as the newspapers that spawned them” in terms of ad revenue.

In another striking example of the divergence in forecasts for the traditional and new media, Mr. Coen, whose agency is part of the McCann Worldgroup unit of the Interpublic Group of Companies, predicted that ad spending on the four largest national broadcast television networks would increase just 3 percent next year from 2006.

In contrast, ad spending by national advertisers on the Internet will grow five times as fast, at 15 percent, Mr. Coen said.

Mr. Coen does not include search engine marketing in his estimates for Internet ad spending, classifying it as more promotional in nature. Another forecaster who does include it within his online totals — Steve King, worldwide chief executive at ZenithOptimedia, part of the Publicis Groupe — offered a prediction that Internet ad spending next year would grow 29 percent from 2006.

By comparison, Mr. King offered forecasts for many traditional media for percentage gains in low single digits like 1.5 percent for local radio and 2 percent for newspapers.
In fact, Mr. King said, he expected online ad revenue to grow at “seven times the rate for traditional ad growth.”

Internet ad spending as a percentage of the total for all American media will reach 7.1 percent this year, Mr. King said. He predicts that it will hit 10.4 percent in 2009.

Mr. Coen, who offers forecasts twice a year, predicted that American ad spending in 2007 would total $298.8 billion, up 4.8 percent from $285.1 billion in 2006. That is a full percentage point lower than the 5.8 percent increase he predicted last June when he gave his initial forecast for 2007.

Mr. Coen’s total for 2006 represents an increase of 5.2 percent from 2005. By contrast, last June he forecast a gain of 5.6 percent. Twice before, in June and December 2005, he predicted an increase of 5.8 percent.

Mr. Coen attributed the decline largely to “the beleaguered local sector” of ad spending, “which hasn’t done very well in traditional media,” he said, because local advertisers “continue to cut to the bone.”

Also, “consolidations are killing things” locally, Mr. Coen said, referring to combinations of local department stores, pharmacies and hardware chains, which are reducing the ranks of potential advertisers.

That was demonstrated — painfully, if you own a local newspaper — in Mr. Conaghan’s presentation. In the third quarter, when Federated Department Stores replaced a host of local retail names with the Macy’s brand, he said, the company’s ad spending in newspapers fell about 14 percent from the same period a year ago.

The declines were even more pronounced in certain Macy’s regional markets, Mr. Conaghan said, citing decreases of 34 percent in the South, 39 percent in the Midwest and 42 percent in the West.