Three forecasts from agency networks - Publicis' ZenithOptimedia, Omnicom-owned pooled buying shop OPera and WPP's GroupM - have provided a similar prognosis for 2007.
Online is expected to be the star performer once again, with anticipated ad spend growth of 25-35% - not just in search but with online display advertising also expected to grow strongly. Conversely, traditional media sectors are tipped to be flat or down, with only outdoor and cinema showing any growth.
Intuitively, it appears that media budgets are being reallocated. The shift of money from offline to online is well-documented, but economic factors and price depression are also affecting traditional media.
Overall, media spending is expected to grow next year - but only slightly. In 2006, advertising spend was down in real terms, with a 1.3% decline after adjusting for inflation. ZenithOptimedia predicts a return to growth in 2007, with an anticipated rise of 1.2% in real terms. Yet, since the gross domestic product is growing 2-3% per year, the advertising sector is underperforming.
Jonathan Barnard, head of publications at ZenithOptimedia, says this suggests the trends are fundamental rather than cyclical. "You wouldn't expect at this point of the economic cycle to see a downturn," he says. "It's quite surprising because in a period of economic growth you would expect to see advertising at least match, if not exceed, economic growth and we're still quite some way behind at the moment."
Gary Knight, brand partnerships director for ITV, says traditional media is under pressure from a tough retail and consumer market, despite economic growth: "There's a lot of debt out there on credit cards and the high cost of housing and fuel means it's a tough environment and most clients are cautious about committing budgets a long way in advance."
Another factor affecting traditional media is price depression, caused by a massive spike in the supply of media space that has not been matched by increased demand from advertisers. There is almost unlimited cheap inventory on the web, while new multichannel TV and digital radio stations, magazine launches and an expansion of poster sites have increased competition in other sectors.
Andy Barnes, Channel 4 sales director, says it's a matter of simple economics. "There has been a massive increase of supply and unless that's met with an increase in demand, the price has to fall," Barnes says. "Advertisers are not required to spend as much to get what they need."
ZenithOptimedia's Barnard adds that one of the biggest factors has been contract rights renewal, which has driven down the cost of advertising on television.
However, Duncan George, commercial director at GCap Media, believes the main driver of online growth is the behaviour of consumers, although he acknowledges that economic factors have also played a role.
"Advertising revenues are following consumer trends - online media owners are still relatively new but the take-up by consumers has been very rapid," George says.
He adds that the sponsorship and promotions business is healthy, but he believes radio spot advertising is undervalued and eventually "a more natural order will resume".
Simon Davies, advertisement director at The Mail on Sunday, also believes there is an obvious link, especially when it comes to the classifieds sector. "There's cause and effect with digital becoming so much part of everybody's life and the median age of people who read newspapers getting older," Davies says. "The online side of the business is mostly affecting classified, but I don't think online or the digital medium is really affecting the key (display) categories of travel, finance, retail and motoring."
He is more optimistic about 2007, saying that The Mail on Sunday is already up 3% year on year since the start of its financial year in October.
ITV's Knight says the main TV groups are preparing to launch broadband services in 2007 and this could be the catalyst to get FMCG advertisers online.
Karen Stacey, broadcast and interactive sales director for Emap Advertising, says this is an example of how convergence is blurring the boundaries between online and every other media: "If you're watching Lost through your PC and there is an ad in the middle of Lost, is that a television ad or an online ad?"
Online might be a threat to traditional ad revenues, but it is still media and the challenge for media owners and agencies is to ensure that clients can find better value in media and not divert funds below-the-line, or back to the bottom line FORECASTS FOR 2007
OPera - up 3% (display up 1.7%)
ZenithOptimedia - up 3.7%
GroupM - up 4.9%
OPera - down 2.7%
ZenithOptimedia - up 1%
GroupM - up 0.8% (interactive TV up 30%)
OPera - down 2%
ZenithOptimedia - up 0.9%
GroupM - up 1.1%
OPera - down 1.2%
ZenithOptimedia - down 0.8% (newspapers down 1.4%, magazines up 0.8%)
GroupM - down 1.9% (national newspapers down 2.1%, regionals down 3.3%, consumer magazines up 0.2%, B2B magazines up 0.8%)
OPera - up 4%
ZenithOptimedia - up 2.5%
GroupM - up 3%
OPera - up 5%
ZenithOptimedia - up 3.8%
GroupM - up 5.7%
OPera - up 27%
ZenithOptimedia - up 25.1% (search up 25.9%, classifieds up 14.8%, display up 30%)
GroupM - up 36.2%
Group M - up 66.7%.