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Magna Forecast: U.S. Ad Economy to Drop 14.5% This Year

Industry Won’t Climb Out of Recession Until Second Half of 2010

Published: July 13, 2009

by Michael Bush

NEW YORK (AdAge.com) — In his first forecast as the new global director of forecasting for Interpublic Group of Cos.’ Magna, Brian Wieser came bearing a new methodology and some bad news.

During a presentation this morning, Mr. Wieser said the U.S. advertising economy will drop 14.5% this year, with revenue at media suppliers — meaning those entities that sell advertising — falling from $189 billion to $161 billion. And Mr. Wieser said he doesn’t anticipate the industry to start exiting the recession until the second half of next year.

Brian Wieser

Mr. Wieser said the worst may soon be over, though, claiming that the first half of 2009 would most likely turn out to be the lowest period of this recession. Magna estimates that media supplier ad revenues will have fallen by 18% compared with the same time last year. Magna said it is anticipating further decline through the second half of 2010 at “moderating levels,” and that total market growth will begin to surface in the second half of 2011.

The continuing economic challenges will create further reductions in media supplier ad revenue next year, as suppliers face a 2% decline in 2010, Mr. Wieser said. And while he believes growth will return gradually, he expects that total media supplier ad revenue will only increase by a compounded annual growth rate of 1% between 2009 and 2014.

Not only was this Mr. Wieser’s first forecast since taking over from industry mainstay Robert Coen, but it was also the debut of Magna’s new forecasting model, which is no longer calculated on advertising expenditures, but instead on the advertising revenue generated by the media suppliers. And the organization of its forecast is also fresh as Magna is now grouping media into direct, national and local media types.

Although lines may blur between these groupings (for example, some direct media are targeted to local communities and some local advertisers buy on national media outlets), Magna describes the new methodology as allocating media into the “categories which broadly reflect the way in which media is today transacted, assessed and organized at a corporate level.”

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