An Increase in Advertising Optimism for Media Giants
As we await the media giants’ third quarter earnings, some optimistic signs are emerging that the ad markets may be about to turn around. Double-digit declines in ad spending across the board has particularly slammed companies like CBS, which relies on ads for more than two thirds of its revenue, and dragged down the results at ABC and NBC. Now we're getting some strong signs that the worst is behind us. We'll be listening carefully to hear what the CEOs of the media giants say in their post-earnings conference calls.
- US Recession Over: NABE
UBS analyst Michael Morris released a report this morning predicting that the 1.1 percent increase in September same-store sales will encourage retailers to increase their advertising spend to "compete for share of still shaky demand." The fact that this is the first time the index has shown year-over-year growth in 13 months should raise a flag for advertisers that this is a real reversal of the downward trend. Morris points out that retail advertising accounted for 14 percent of all ad spend last year, and that as consumer spending returns, advertisers who pulled back will be encouraged to invest again.
But hold your horses, we're not talking about a full recovery: Morris says he expects only 45 percent of the US TV advertising lost during the 2007 to 2009 downturn to be recovered in 2010. The TV networks will still be the go-to destination for reaching a mass audience, but advertisers will continue diverting their funds to the more focused audience on cable, and of course, to truly targeted and measurable ads on the Internet.
A new report on marketing - the IPA/BDO Bellwether survey shows that the quarter-over-quarter decline in marketing spend was the smallest in more than a year. Tracking spending on marketing by 300 companies, the survey did show that spending slowed for an eight consecutive quarter, but the fact that the *rate* is slowing indicates that we're near or at a bottom. Spending on Internet advertising rose for the first time since the first half of 2008 and traditional media advertising saw the smallest reduction in six quarters. The numbers show that marketers are wary of un-measurable investments - the amount they spent on pr, sponsorship and events, suffered the steepest drop.
Another headline pointing to a future recovery comes from General Motors: the embattled automaker says is looking for a new ad agency to try to rev up its Cadillac brand. A new ad agency promises a new ad campaign, which should mean a big infusion of cash into the TV networks and glossy magazines where Caddy ads usually run. Last year the Cadillac brand spent some $270 million on ads in the US, but during the first six months of the year the brand spent just $81 million. Now the hope is that a new campaign will bring spending back to previous levels.
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