'Things have stopped getting worse but are not quite yet getting better'.

This message seems to be the cornerstone of Magna's updated media outlook for 2010.

There were encouraging signs in the second half of this year that indicate U.S. advertising revenue will decline by a less-than-expected rate in 2010 than previously assumed, the ad buying agency Magna said on Oct 13.

The firm says the decline would be in the range of 1.3% in 2010, a healthy and welcome correction from the previously published expectations of 2.1% decline.

In total, Magna expects suppliers to generate $159 billion of normalized advertising revenue next year as the economy begins its recovery from four straight quarters of recession.

The analysis excluded political and Olympic advertising dollars.

Many sectors are expected to show marked improvement in 2010. Chief of them are national TV, which will improve to 1.3 percent, to $32.7 billion, and digital / online, which is expected to grow to 1.1 percent to $5.64 billion.

Magna also believes that national magazines will dip 6.2 percent to $14.6 billion, versus a 19.2 percent decline this year ($15.5 billion).

Among major economic measures, Industrial Production (IP) and Personal Consumption Expenditures (PCE) have the highest correlations with advertising, and forecasts of these variables inform our predictions of advertising revenue growth and decline, says MAGNA.

Magna notes that while consensus forecasts for consumer expenditures have not changed in a meaningful manner, expectations for industrial production have improved.

For the fourth quarter of this year, Magna said ad revenue is expected to decline 9% compared with the same quarter in 2008 -- "a significant improvement over drop-offs of 18% in the first two quarters of 2009 and 13% in the third quarter."

Conclusion

What all this means is that although the economy continues to face immense challenges, expectations for the future have improved significantly based on the good showing by the key performance indicators in the the past two quarters.

2009 seems like the bottoming out year for most advertising spend in the U.S. For 2010, online advertising still looks the most rosy, with traditional media like television and radio breaking free from the slump.

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