Eight of the 10 Largest US Advertisers Slashed Their Ad Budgets in 2005, Led By Proctor & Gamble’s 4.6% Decline, But The Total US Spend Still Grew By 3% to $143 Billion. What Does That Say For 2006?

But TNS Media Intelligence (TNSMI) believes 2006 will be stronger, forecasting a 5% gain for the first half and 5.7% increase for the second half for an average 5.4%. Merrill Lynch says it stands by its earlier 2006 forecast that US ad expenditures will grow by 4.6% in 2005, McCann-Erickson says growth will be 5.8% and Zenith puts it at 5.1%

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Last November, the largest shareholder in US newspaper shares shocked Wall Street by demanding that Knight-Ridder (K-R) put itself up for sale to enhance shareholder value. The next two largest shareholders joined in and the die was cast. Shares in K-R and most other publicly quoted companies rose strongly and immediately on the hope this was just the start of improving shareholder value for that market sector.

As If Google Didn’t Have Enough Problems with Taxes Taking A Big Bite Out Of Profits That Caused Its Shares Drop By 12% in One Day, and Criticism For Its Censorship Policies Appeasing the Chinese, Now It has Europeans Publishers Mad That The Search Engine Uses Their News Without Payment

Google shares got nailed this week, initially a 12% drop knocking some $20 billion off its market cap although it recovered a bit from there, because fourth quarter earnings, while very good, got hit by high taxes and Wall street didn’t like that. It’s had a tough PR week, too, not showing up at a Congressional hearing into censorship policies agreed by American companies doing business in China, and then European publishers warned they are asking the EU Commission to take a look at why the search engine doesn’t pay for the news its robots scan and sort into various categories on the Google news site.

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One basic reason for the 2006 increases is that 2005 was a relatively poor television year, but 2006 has already experienced the Olympic Games and there are Congressional elections in November.

Automobile makers – domestic and foreign -- as a sector remain the largest advertising group in the US – its $17.14 billion is more than double the next closest sector, financial services, at $8.3 billion – but the automakers are no longer the “fat cows” they once were and they are now giving major heartburn to traditional media.

General Motors with a major drive in Q4 actually increased its spend by 7.1% to $3 billion, Ford remained basically flat, but Daimler-Chrysler dropped its spend by some $230 million (12.8%) to $1.58 billion – such a big reduction that BBDO, its lead advertising agency cut 200 jobs in its Troy, Michigan office where there are some 1,800 staff working on the Chrysler, Jeep and Dodge accounts.

A larger proportion of that auto money went to the Internet, and newspapers ended 2005 with 10% less auto revenue than the year before. And according to Merrill Lynch, January, 2006 magazine advertising saw the auto spend drop a whopping 25%.

Reinforcing why automobile makers are pouring more of their money into Web activities, a survey by Outsell, a research and advisory firm in California, says that when consumers start their research to buy consumer items, such as a car, the Web is their first port of call.

According to Outsell, the first site people go to is a search engine followed by those sites the search engine fed the consumer which is as good a rason as any to show the power of keyword search advertising. Unfortunately for newspapers, even though their web sirtes are very popular for catching up on local news, that usage doesn’t extend to the buy side -- just 8% of respondents said they use a newspaper web site for that purpose. Print newspapers scored 22%, less than half of those who would first go to the search engine.

eMarketer reports the top ten automotive advertisers spent about $1.4 billion online in 2005, but projects that will nearly double in 2006. That means that by 2007 the auto industry will be responsible for about 15% of U.S. online advertising compared with 11 percent in 2005.

But for all the bad news that newspapers have reported over the past couple of years of declining circulations and the like, local newspapers taken as a sector, still receives more advertising monies than any other medium -- $25.1 billion in 2005, an increase of 1.1% over 2004.

The Internet without paid search advertising still saw revenue increase by 13.3% to $8.3 billion. If search advertising was included the increase would be around 30%. Network television without election advertising saw a $1.63 billion (9.5%) fall-off.

For 2006, TNSMI says the Internet. not including paid search, will increase revenues by 9.1%, network TV goes up 4.5%, newspapers up by 4.3% and radio by 3.6%

“We anticipate advertising spending to continue on a steady track in 2006 due to several major events, including the Winter Olympics in the first quarter, and the surge of political advertising for the mid-term 2006 elections, which is set to surpass the record levels of 2004, according to TNSMI President and CEO, Steven J. Fredericks.

“Additionally, steady economic growth in 2006 will boost CEO confidence, translating into increased rates of total advertising spending. All leading categories of media will register growth in advertising spending,” he said.

One other large advertising growth area is television product placement. TNSMI now estimates that some 11% of all programming minutes now include a brand reference. Some one-hour programs – particularly reality shows –have around 11 minutes of branding exposure in addition to the 17 minutes of commercial time.

Meanwhile the Publishers Information Bureau says that January was a poor start for US magazines with a 1.9% decline in ad page volume over the year before. The drop was surprising considering the industry came off a very strong December, 2005, with ad sales up 3.4% over the year before.

But news weeklies bucked the trend, with titles such as Newsweek and Business Week showing double-digit growth in January, although Time Magazine, showing perhaps why it recently went through a cull of about 100 staffers, reported a 16.8% advertising page drop in January.

Although the auto advertising was way down, the news weeklies seem to be benefiting from increased technology advertising while the business publications are seeing an increase in business-to-business advertising.

As for newspapers in 2005, Merrill calls it “a year to forget.” Merrill had estimated that ad revenue for the 11 major newspaper holding companies would increase by 4% in 2005, but they achieved only 2%. It believes 2006 is “likely to remain a challenge.”

But perhaps the most interesting statistic of all comes from New York’s Metropolitan Travel Authority (MTA) that takes umbrage over what are commonly called “free” newspapers. They may be free to the consumer but they are costing the city a fortune.

It seems, according to the MTA, that additional refuse from riders, especially from leaving behind the free newspapers, added in 2005 about 15 tons more trash a day to the subway system than in 2004, causing more track fires, train delays, and adding millions of dollars to MTA expenses.

Eight of the 10 Largest US Advertisers Slashed Their Ad Budgets in 2005, Led By Proctor & Gamble’s 4.6% Decline, But The Total US Spend Still Grew By 3% to $143 Billion. What Does That Say For 2006?

Procter & Gamble’s $3.2 billion spent on advertising in 2005 ensured it still remained the largest US advertiser, but that figure was down 4.6% over the year before, and eight out of the largest US advertisers also spent less meaning the total spend of the top 10 dropped by 3.3% to $18.6 billion.