Pressure on rates in traditional media, along with potential weakness in the automotive and entertainment industries, will slow down ad spending this year and next, according to industry analyst Lauren Fine of Merrill Lynch, writes MarketWatch. Fine lowered her U.S. ad spending forecast to 3.2 percent growth in 2005 from the previous 3.7 percent, and reduced the 2006 estimate to 4.5 percent from 5.2 percent.

"If realized, our 2006 forecasts would imply a second consecutive year of underperformance of ad spending relative to GDP growth, despite the expected influx of political and Olympics advertising next year," she said.

Fine remains optimistic about the agency side, however: "We continue to think that the ad agency group is a preferred way to play media," she said. "As ad agencies are mostly compensated on fees, not commissions, they are not impacted by the absence of media rate inflation and they benefit from the increased usage of new channels, such as the internet."

Omnicom Group is her top pick in the sector, which could also benefit "from faster-growing overseas economies."