Ad recovery elusive even as media stocks rally

By Paul Thomasch - Analysis

NEW YORK (Reuters) -If the recent run-up in media company stocks is any indication, a number of investors believe advertisers are again ready to open their checkbooks for television campaigns, radio spots or a roadside billboard with a 14-foot-tall underwear model.

Trouble is, that may reflect just wishful thinking.

In the past month, Time Warner Inc (TWX.N) and News Corp (NWSA.O) shares have risen nearly 20 percent, while CBS Corp (CBS.N) has surged about 40 percent. Overall, the Standard & Poor's Media index .GSPME, made up of companies that count on advertising for big chunks of revenue, has added 11 percent and outperformed the broader stock market.

Still, experts warn advertising budgets are not yet showing indications of a comeback, after corporations heavily cut spending on everything from print campaigns to Web banners as the recession worsened late last year.

"We haven't seen any real signs of anything increasing this year," said Cathleen Campe, director of media communications, broadcast & video investment at RPA, a Los Angeles-based advertising and media agency. "I've heard some talk about 2010 getting better -- well, let's hope so."

Just how devastating the advertising crash has been to the media business will be clear over the next 10 days as the major conglomerates report earnings. Walt Disney Co (DIS.N), Viacom Inc (VIAb.N) and News Corp, for instance, are all expected to post 35 percent to 50 percent declines in profits.

Omnicom Group Inc (OMC.N), the parent company of major advertising agencies like BBDO Worldwide and DDB Worldwide, reported a 21 percent drop in quarterly profit on Monday.

"I think the people who are at all optimistic are looking toward the real back end of this year and the beginning of next," Omnicom Chief Executive John Wren said on a conference call. "I think you'll continue to see similar caution in the second quarter that you've seen this quarter."