Citi delivers more bad ad news

Earlier forecast of fractional growth is revised to declines until 2010

U.S. advertising spending will decline 1.8% this year and 3.6% next year, and not even the Internet will be safe, Citi Investment Research predicted Tuesday.

Media analysts at the bank lowered their ad forecasts across media categories, with Web estimates hit particularly hard, and they also warned that a rebound in ad momentum likely won't come until 2010.

The Citi team became the latest to downgrade their outlook for the U.S. ad market in its report titled "Batten Down the Hatches: Credit Crunch, Consumer Spend Slowdown & Advertiser Pullback Lead to Prolonged Ad Market Downturn."

Citi analysts Catriona Fallon, Jason Bazinet and Mark Mahaney had called for 0.2% growth in 2008 and a 0.3% gain next year.

"The pullback in ad spending by local businesses compounded by national advertisers holding off on budgets is causing a slowing across all U.S. ad mediums," they said.

The analysts expect an ad rebound only after signs of a strengthening economy, which Citi's team of economists project for fourth-quarter 2010.

Meanwhile, UBS analyst Michael Morris on Tuesday updated possible 2009 recession revenue and earnings scenarios for media conglomerates and their various divisions.

For example, News Corp.'s broadcast TV unit could be the worst hit, with the UBS analyst expecting a 15% fiscal-year 2009 drop that could expand to 17% or even 24% in the analyst's "worst case" scenario. (partialdiff)