Media Money with Julia Boorstin

Recession -- for Ads


The U.S. is officially in a recession -- an ad recession. Two consecutive quarters of contraction define recession, and that's exactly what's happening on Madison Avenue. This is the first time since the ad recession of 2001 that we've seen two quarters of declining ad spend. For the first half of 2007, ad spending was down 0.3% according to TNS Media Intelligence.

Newspapers suffered the most, losing 5.8% in ad revenue, while TV ad sales also dragged down the market, down 2.4%. There is a bright spot-- the Internet, with display ad spending up 17.7%. And since TNS Media Intelligence doesn't include search ads, there's another $5 billion or so in ad spend that's not accounted for.

The big advertiser that cut back the most -- General Motors -- slashed its ad budget by 25%. AT&T also cut back by over 12%. Time Warner's ad budget dropped by 8%, a result of its new AOL strategy that relies less on luring subscriptions.

Believe it or not, some advertisers are spending much more. Competition in the wireless space pushed Verizon to increase its spending by 9% and Sprint Nextel by over 13%. An increase in film releases this year meant more movie ads. National Amusements theater chain advertising was up 56% this year compared to last.

Sadly, things will get worse before they get better. Most of the decline so far is in local advertising. Since local ad trends lead national trends by about 3-6 months, we can expect the national market to suffer more this fall, especially as the credit crunch takes its toll. But by mid next year things will be better -- especially because the third quarter of 2008 is when political ads will really make a big difference.

Questions?  Comments?