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Bellwether Report shows strongest spending growth in three years

LONDON - Agencies and media owners can look forward to positive growth for the rest of the year, with the first quarter 2007 Bellwether Report recording the strongest increase in marketing spend from advertisers for three years.

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According to the UK-based report, released by the Institute of Practitioners in Advertising, one in four companies is now reporting an upward revision to total current marketing budgets, which represents an improvement compared to previous reports for 2005 and 2006, with budgets expected to rise throughout the year.

In the first quarter, 24% of companies included in the report increased total marketing budgets, while 16% reported a decrease, leaving a net positive balance of 7.7%.

This is set to continue throughout the year with 54% of companies setting their new budgets for 2007 higher than their actual spend in 2006, while only 17% have reported a reduction. The resulting 37% net increase is the strongest since 2000.

Traditional media, including television, press, radio, cinema and out-of-home, has seen the first upward revision in spending for two-and-a-half years, with a net increase of 2.5%. although this was still a modest improvement as companies continue to move money away from traditional media such as press and TV.

Sir Martin Sorrell, chief executive of WPP, said: "The IPA Bellwether report, once again, reflects what WPP is seeing in the UK --a recovery against, admittedly, weak comparables, with the spending increase being dominated by expansion in direct, internet and interactive media.

"The UK mirrors what is happening in western continental Europe. Direct internet and interactive spending, however, still lags consumer use of such media, with consumers spending reportedly 20% of their time online."

David Pattison, IPA president and chief executive officer of i-level parent company ILG Digital, said: "The first quarter 2007 Bellwether Report is a very encouraging sign for almost every part of our industry. Our clients seem to have found both confidence in the economy, and the strength to compete, to plan increased marketing support across the board."

As expected, advertisers boosted online marketing budgets more than other channels in the first quarter, with 19% of companies reporting an increase.

Online now accounts for around £2bn of marketing spend each year.

Robert Lerwill, chief executive of Aegis group, said: "The growth in digital is being driven by the convergence of media and entertainment. This process is pushing the boundaries of digital marketing, making it more attractive to a broader range of demographics and therefore advertisers.

"The increase in main media advertising spend is also interesting and is indicative of the importance of these media within the communications mix."

Surprisingly, direct marketing budgets were revised up only slightly this quarter, after it saw the strongest growth of all categories in 2006, excluding online.

By client sector, increases to budgets were most widely reported in the service sector and consumer-orientated sectors, especially consumer durables, retail and FMCG. Budget cuts were most widely reported in industrial, utilities and media sectors.

The strongest growth for the rest of 2007 is expected to be in 'non-traditional channels', such as sponsorship, public relations, mobile-phone related activity and direct marketing.

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