McCann's Coen: Online Ad Growth Moderating

Spending on online advertising — excluding search and affiliate marketing — appears to be slowing its rapid growth. This according to a new report by Universal McCann’s forecasting guru, Robert Coen, which also found worldwide ad growth slower than expected for 2005.

In the report, Coen noted that revenues for online advertising were up 8 percent in the first quarter of 2005, as compared to the same period in 2004. By contrast, the first quarter of 2004 saw a 28 percent increase in year-over-year spending.

Spending on display advertising actually shrank in the retail and department store categories. In the first quarter of 2004, retail spending was up 15 percent, while 2005’s first quarter saw a 13 percent year-over-year decline. In the department store vertical, spending was up 24 percent in Q1 of 2004, but, in 2005, the same quarter saw a 70 percent decrease.

Coen hypothesizes that some of the dough might be going into search or other performance-based marketing options, which his research doesn’t measure.

For all of 2005, the report predicts a 15 percent increase in online ad spending by national advertisers. That would put spending at $7.8 billion for the year.

The note about an online display ad slowdown comes as Coen revises downward his predictions about 2005 spending levels in the U.S. and worldwide for all advertising. He now expects U.S. advertising to grow 5.7 percent in 2005, down from an earlier estimate of 6.4 percent. Total worldwide spending will come in at 5.8 percent growth, Coen now predicts. Earlier, he had expected a 6.1 percent growth rate for 2005.

Despite the slower-than-expected growth for 2005, Coen’s 2006 outlook is rosier. He expects a 5.8 percent growth rate for U.S. advertising and 5.7 percent growth worldwide.