Commentary
ROA (Return on Advertising)
- by February 22, 2001
Meg James, Staff Writer for the LA Times, reported in a recent article that media firms are having a hard time anticipating the right mix.
Analysts say ad revenues at local television stations will be down about 12% during the first quarter of this year, and by as much as 20% in smaller markets. Radio stations that posted 35% gains during the first half of 2000 might see a 10% drop during the first six months of this year, according to some analysts.
Wall Street analysts say gloomy reports are overblown. They say revenue declines during the last few months should have been an anticipated hiccup after several fat seasons, including last year's bounce from elections and the Olympics. Several industry watchers predict that the ad market will rebound by year's end.
"The reality is there are no real long-term indicators that point to any sustained downturn," said Jack Myers, chief economist for the Myers Reports Inc., a New York-based research and consulting firm specializing in media. "We're expecting the ad market to return. The blame that corporate executives are placing on the 'soft ad market' is really a convenient excuse more than anything else." Having fewer ad dollars forces executives to review more than just budgets, said Carton of PricewaterhouseCoopers. "The dip causes companies to focus not just on advertising spending but on infrastructure and staffing levels."
Cliff Sloan, president of the Sloan Group marketing agency in New York, said "We're seeing a shift away from broader image-based advertisements. Clients are demanding ads that produce some measurable return. They are very direct and to the point. It's much more issue-based, much more focused. There is more accountability on how dollars are being spent."
Joe Casola, DaimlerChrysler's vice president for global marketing operations, said Chrysler is spending more of its marketing budget on sponsorship deals, including one with NASCAR, he said. "You can measure the return on that type of an investment. You can target the customers and you have a much better chance of selling a car."
But bargaining power has shifted from media companies to the advertisers, said Edward Hatch, senior media analyst for the investment firm S.G. Cowen in New York. Television ad rates have flattened, if not declined slightly.
The amount spent on advertising in the US, however, is expected to continues to climb each year. And even though ad sales have been slow for media companies so far this year, analysts predict that 2001 will end with gains over last year.
- Anticipated spending (in billions)
- Television: $57.4 billion
- Newspapers: $52.1 billion
- Radio/outdoor: $27.1 billion
- Magazines: $24.7 billion
- Internet: $12.1 billion
