MagnaGlobal AD Forecast: Stable, but modest growth ahead.

MagnaGlobal , a division of IPG’s Mediabrands, releases an updated US Media Advertising Revenue Forecast.

We expect media suppliers to generate $169.9 billion dollars of advertising revenues during 2010. On the back of continued improvements in the economy and the absence of a “double dip” return to recessionary conditions, MagnaGlobal forecasts that the US advertising economy will grow by 2.1% during 2010, excluding Political and Olympic advertising on TV. This is marginally higher than our prior forecast of 1.6% year-to-year growth.

Including Political and Olympic advertising, we expect 3.4% total industry growth for 2010. We are effectively maintaining our long-term forecasts, with 3.6% average growth expected between 2010 and 2015, up from +3.5% previously. For the third quarter of 2010, MagnaGlobal forecasts that US media suppliers will collectively generate 2.4% more advertising revenue on a normalized basis than they did when compared to the prior year period.

Awareness-Driven Media Growing Faster Than Expected; Direct Media Decelerates As Economy Improves

Among the various sectors, television remains the largest advertising platform in the United States. The $56.4 billion dollar segment will grow slightly faster than our prior expectations, largely led by national cable, whose share of television advertising revenues is in turn caused by a generally rising share of audiences. Local television is also faring well, with results so far this year exceeding our prior expectations – independent of political advertising, which will represent an additional source of growth for the medium this year.

Online advertising continues to grow rapidly, with double digit growth rates among many of the industry’s sub-segments – especially Online Video and Paid Search as well as Internet Yellow Pages. But growth for digital media is partially held back by weakness in the Online Classifieds sector, and the depth of this weakness has caused us to slightly reduce expectations for the sector as a whole even as online advertising and digital media continue to increase in importance for advertising.

Among the more notable findings from our review of the most recent quarter’s advertising revenues is the slowdown in growth of Direct Media (which incorporates Internet Yellow Pages, Paid Search, Lead Generation, Directories, and Direct Mail). Collectively, this segment accounts for more than a quarter of all suppliers’ advertising revenues in the United States, and this share was rising rapidly during each quarter in 2008 and 2009. However, our estimates for the first quarter of 2010 indicated slower-than-expected growth for most of these sub-segments. While we expect the trend of increasing reliance on Direct Media to resume over the long-term, the worse-than-expected results may indicate a resumption of focus on awareness-driven media channels as the economy improves. Concurrently, they may also reflect continuing weakness among the segments of advertisers who focus on these channels – small and medium-sized advertisers – in contrast to returning growth for the larger advertisers, who have historically focused on mass media vehicles.