It's a disappointing year for U.S. ad spending

A projected increase in U.S. advertising spending of 4 percent this year, to $165 billion, might sound pretty good. But it's fairly mediocre, considering this year's Sochi Winter Olympics and midterm elections, both of which generated less interest than expected, according to Interpublic Group of Cos.'s Magna Global media-buying unit. Magna Global also sees ad spending increasing in 2015 by 2.7 percent, to $169.5 billion, down from it's earlier forecast of a 3.3 percent rise.

Beyond the disappointing results from this year's big one-time events, "A second factor was the micro-recession that the US experienced in the first quarter, partly due to a severe weather that hit retail, restaurants and automotive dealers, three of the biggest advertising spending sectors," the report said. "The economy started to steadily grow again from the second quarter, but many advertisers had already entered into a cautious, saving mode. "

The Sochi Olympics, which was broadcast on Comcast's (CMCSA) NBC network, generated $450 million in ad revenue, versus the $600 million the Philadelphia-based company earned from the 2010 Vancouver Games. The $100 million spent on the FIFA World Cup wasn't enough to offset the decline from the Olympics. Election spending was $2.2 billion, 17 percent lower than in 2012.

"The midterm elections generated less spending than the previous election cycle of 2012 partly because the main 'battlegrounds' were located in relatively small markets," said Magna Global, "while big markets like New York and California presented little uncertainty and therefore little incentive to throw huge amounts of ad spend."

Magna Global also is taking a cautious view of the worldwide ad market, which it expects will grow by 4.8 percent to $536 billion next year, a slowdown from the 5.5 percent it expects for 2014. The U.K., Australia, India, Japan and Spain will grow at a faster rate than previously forecast, while China, Russia, Brazil, Germany and Canada will grow at a slower pace.

Global online ad spending, however, is slated to surge 17 percent, to $142 billion, this year, spurred by the growth in mobile advertising and social media. Facebook (FB) and Twitter (TWTR) are among the companies excited about the potential for mobile, and it's easy to understand why. According to Magna Global, digital will account for 30 percent of overall ad spending in 2015. The company expects online ad spending to equal TV ad sales in 2019, when both will account for 38 percent of the total.

Not surprisingly, demand for traditional media continues to decline. Newspaper ad sales fell on average by 4.3 percent, while magazines plunged 7.3 percent and radio was unchanged. Digital media is the top category in 14 out of the 73 markets Magna Global examined.

"When shifting budgets towards digital, advertisers are not just following users and 'eyeballs' but also expecting to save on their overall advertising and marketing spend," the report said. "Any superior return on investment translates into optimization rather than increasing the investment. This trend has been at work for a few years but as digital media reaches critical mass, each market share point gained by digital has an increasingly big impact on traditional media. "