U.S. Advertising Market Hit By Housing Slump, Study Says

By DANIEL THOMAS and JESSICA HODGSON
October 3, 2007 12:07 a.m.

LONDON -- U.S. advertising spending is likely to slow for the remainder of 2007, with the current credit squeeze and housing market slump hitting budgets, a study published Monday predicts.

Research from advertising forecaster ZenithOptimedia, a unit of Publicis Groupe S.A. downgraded growth in the U.S. advertising market in 2007, to 2.5% growth from the 3.3% it previously forecast.

"The continued slump in the U.S. housing market has led to a sharp drop in property and construction advertising, particularly in property classified in newspapers. This, and the recent credit squeeze, has led us to downgrade our forecast for growth in the U.S. this year," said the company in a statement.

ZenithOptimedia also forecasts that the growth of video and localized Internet search engines will boost Web-based advertising by 30% this year, a rate that is nine times faster than the overall advertising industry. Total Internet advertising spending is expected to increase 85% between 2006 and 2009, surpassing advertising spending on the radio.

Despite television facing stiffer competition from Internet entertainment and digital personal video recorders, ZenithOptimedia expects global advertising spending for television to increase its market share to 38.2% in 2008 from 37.9%.

Mirroring recent comments made by WPP Group PLC Chief Executive Martin Sorrell, ZenithOptimedia said that next year's Chinese Olympic Games will help boost television advertising.

But television's world-wide growth masks a decline in many countries in North America and Western Europe, ZenithOptimedia says. In 2008, television's share of advertising expenditure will fall 0.3 percentage points to 32.4% in North America and 0.5 percentage points to 30.4% in Western Europe, analysts forecast.

Continued strong growth in Internet advertising has prompted ZenithOptimedia analysts to raise their total forecasts for internet advertising to 29.9% in 2007, up from 28.6% three months ago.

Newspapers are suffering more than any other medium from the impact of the Internet, ZenithOptimedia says. It expects newspapers' share of the total world advertising expenditure to fall to 26.2% in 2009 from 29% in 2006.