Ad Spending: Just How Bad Is It Going To Get?


As the global financial crisis continues, the advertising environment for the near future is looking increasingly grim. Next year already faced tough comparisons with this year's Olympics and political ad spending, but now with the economy in flux (and that's putting it nicely) the ad industry is going to be in bad shape.

With the first ad spending outlook revision since the financial crisis hit fever pitch, Publicis' Zenith Optimedia unit slashed and burned its industry growth expectations. Zenith Optimedia now expects the U.S. ad market to grow just .7 percent in 2009, down from its previous expectation of 2.6 percent growth. Zenith now expects global ad markets to grow 4 percent in 2009, compared to its previous predictions of 6 percent growth.

But even these lowered numbers seem too optimistic to a number of Wall Street executives who expect the Wall Street financial crisis to hit consumer spending, which will hit advertising; this on top of already difficult comparisons. And now luxury goods companies, and travel and entertainment companies, previously considered impervious to our economic hiccups, are expected to look to their advertising spend as a place to cut back.

Barclays Capital's Media and Internet team just released its 2009 ad forecasts which were far more negative, predicting that total U.S. advertising will decrease 3.6 percent to $284.3 billion and in 2009 will decrease a further 5.5 percent. (In comparison to previous recessions, in 1992 U.S. advertising decreased 1.9 percent, in 2001 it dropped 6.2 percent). Barclays expects local advertising to be hit the hardest, local ad spend down 7.1 percent in 2009, while national ad spending is down just 4.5 percent.

Who will weather the storm? Surprisingly, TV is likely to emerge the strongest: advertisers like how familiar the medium is, and that they're guaranteed a certain number of ratings points or eyeballs. While web ads may be trackable after the fact, there's no guarantee that people will see them. The area most likely to get battered by this financial hurricane--newspapers, which are already in pretty bad shape.

While advertisers reevaluate how to spend, some are actually spending more, hoping to shore up their base or grow marketshare. I'll have more on those big spenders in future posts.

Questions? Comments?