July 13 (Bloomberg) -- U.S. advertising revenue may drop 14.5 percent this year and continue to decline until an economic recovery sparks growth near the end of 2010, Magna Global said.

Revenue may fall to $161.4 billion after declining 7.5 percent in 2008, with newspapers hit the hardest by marketers and readers defecting to the Internet, Brian Wieser, Magna Global’s forecasting director, said on a Webcast today. The forecast excludes the impact of political and Olympic ads.

“Between ‘08 and ‘09 you’re seeing almost a quarter of the market evaporating,” Weiser said in an interview. “The economy’s driving it.”

The ad market may fall to $157.9 billion next year, the lowest since 1998, according to Magna. Growth will return in the fourth quarter of 2010 with a 1 percent gain, led by cable- television and online ads, according to Wieser and Magna’s forecast data.

From 2009 to 2014, U.S. advertising may increase at a compound annual rate of 0.9 percent, Wieser said. Revenue dropped 18 percent in the second quarter, he estimates.

Local newspapers’ ad revenue is projected to drop almost 27 percent this year, steeper than last year’s 18 percent decline, according to Magna. In 2010, the decline may slow to 9.4 percent because of year-over-year comparisons, Wieser said.

Newspaper Ads

“Newspapers are facing several problems, certainly there’s the shift of consumption from print to online, but you also have the evaporation of several key sectors,” including real estate, automotive and classified ads, Wieser said in the interview. “Newspapers were already weak. The economy made it even worse.”

Magna’s 2009 ad prediction is more pessimistic than a July 6 report by rival media-research firm ZenithOptimedia Group Ltd., which estimated a drop of 10.6 percent in U.S. ad sales this year. ZenithOptimedia, a Publicis Groupe SA unit, said worldwide spending this year will drop 8.5 percent to about $456 billion. It previously predicted a 6.9 percent decline.

New York-based Magna is a unit of Interpublic Group of Cos., the second-largest U.S. owner of advertising agencies. Interpublic added 1 cent to $4.81 at 4:01 p.m. in New York Stock Exchange composite trading. The shares have gained 21 percent this year.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

Last Updated: July 13, 2009 16:24 EDT