Few green shoots as recession tramples over advertising industry

MEDIA & MARKETING: Media organisations and advertising agencies can’t recall such a sudden slump in advertising activity…

MEDIA & MARKETING:Media organisations and advertising agencies can't recall such a sudden slump in advertising activity, writes SIOBHÁN O'CONNELL.

MANAGERS WORKING in media organisations and their counterparts in advertising agencies agree that they can’t recall such a sudden and severe slump in advertising activity as occurred in the first half of 2009. As the traditional summer lull looms and the industry regroups to prepare for the next six months of battle, is there any hope on the horizon?

The decline in advertising spend has affected some media outlets more than others. According to Aidan Greene, of advertising agency MediaVest: “Nielsen data for the first four months of the year shows that the overall spend on offline media was down 20 per cent year-on-year. However, this figure does not take into account widespread discounting off rate card prices”.

When account is taken of those discounts, MediaVest estimates that advertising spend on television and outdoor is down by a minimum of 35 per cent. Radio is suffering less with a drop of 20 per cent, while cinema is down about 15 per cent. Online search advertising is still showing growth, but at a much reduced pace than last year.

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Greene added: “Press is probably the most interesting case. While Nielsen states that sector revenues have fallen by 15 per cent, many newspapers say the drop is much bigger than that. Some of the broadsheet titles which relied on recruitment, Government and property advertising sectors have seen those revenues decimated. Their tabloid cousins have fared better, with ad revenue declines losses in line with radio and cinema.

“The question for media owners and agencies alike is whether they can sustain their business model taking in a quarter less than they did last year.”

David Sneddon, managing director of Mindshare, believes that businesses in many sectors are not confident about the rest of 2009 and are therefore not allocating funds to supporting marketing communications in any comparable way to previous years. “The one green shoot is the supermarket retailers as they are ramping up their price war,” said Sneddon. “We also expect utility companies to aggressively market themselves. It’s probably reasonable to expect some very moderate growth next year, or at least flatline on this year, although that’s not a given at this stage. The immediate challenge for the industry is to get through the summer.”

Dave Harland, chief executive of Omnicom Media Group, said that, in the altered media landscape, advertising agencies will have to change the way they operate. “With smaller budgets, we should see ourselves as media investors not media buyers, investing in the longer-term future of the more progressive and pioneering media companies that will deliver more readers, viewers, listeners, users and customers. The relationship with the media owners is becoming more open, transparent and collaborative.

“With oversupply, the cost of media is hugely attractive and there is an opportunity for advertisers to grow their share in a declining market very cost effectively. However, it’s vital that media owners do not dumb down editorial standards. Content remains king for attracting advertiser budgets.”

Stuart Fogarty of McConnells Advertising is more optimistic than most and believes an improvement in advertising spend is likely in the last quarter of 2009. “Clients have got used to the recession. Their cost base has been reduced and they have got to a point where they have an understanding of where the market is. I believe that clients will want to start pushing the boat out to stimulate demand.”

In Fogarty’s view, advertising spend from FMCG brands, retail and utilities should pick up as the year progresses. However, he anticipates that the trading environment will remain challenging for TV stations.

“Because of the limited amount of money that clients have available, they are trying to make the maximum impact,” he said. “Less money is being spent on production costs and that has to impact on television. While TV airtime costs have never been so low, production is a big cost.”

All adver agencies, and the various media, will be hoping that Fogarty’s prediction is correct. Meanwhile, the agencies continue to hammer home to their clients the mantra that there has never been a better time to advertise.