Ad spending growth seen slowing sharply in 2007

NEW YORK (Reuters) - Advertising spending growth is expected to slow sharply this year, as the absence of big marketing events and smaller budgets for key categories such as autos will likely make it the industry's toughest year since 2001, according to a study released on Monday.

Tracking firm TNS Media Intelligence forecast ad spending in the United States to rise 2.6 percent in 2007 to $153.7 billion, compared with 3.8 percent growth in 2006, and called the increase "the smallest since the media economy emerged from its 2001 recession."

That lower growth rate is also influenced by weaker spending from key advertisers like automakers and by pricing pressure due to a larger array of competing media outlets.

For example, Internet display advertising is expected to be one of the fastest gainers with 13 percent growth, along with the outdoor and magazine segments, compared with traditional outlets like network television, TNS said.

TNS forecast that ad spending should increase by 2.1 percent in the first half of 2007, followed by a gain of 3.2 percent in the second half.

Steven Fredericks, chief executive of TNS Media Intelligence, blamed the downbeat forecast on the absence of ad spending for the Olympics and federal elections, which he said often meant an extra 80 to 100 basis points for growth rates.

"There's no major advertising event going on in 2007," he said in an interview. "We also don't see a lot of key advertising categories picking up," he added, naming automotive, travel, health and beauty products.

But he said other factors were at work as well, including the rise of advertising in digital media, from the Internet to mobile phones, which has added to the supply of marketing outlets and held back overall prices.

"We're seeing more media, especially digital media, continue to expand and therefore the supply of advertising inventory is expanding. As a result of the inventory expanding, it's holding down media price inflation," Fredericks said.

Among the weaker media, network television is projected to be almost flat versus 2006, radio to underperform with 1.7 percent growth, while newspapers are expected to experience outright declines of nearly 3 percent, the forecast said.

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