Superstorm Throws Sand In Face Of Ad Economy, Reduces '12 Ad Growth To Zero

by , Oct 31, 2012, 9:16 AM
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At least one highly respected media industry economist -- Pivotal Research Group's Brian Wieser -- has already attributed a downgrade to the U.S. advertising industry to the effects of Hurricane Sandy. Wieser's new forecast, coming on the heels of especially tepid third quarter earnings reports from the major agency holding companies, means the ad industry will not expand at all during 2012.

"The Superstorm is going to have an effect," Wieser wrote in an equities research report sent to investors this morning. "If we assume that spending equivalent to one day of the fourth quarter was 'lost' (because of interruptions to local TV and radio programming for several days in a significant portion of the country paired with the impact on decision-making among national marketers and media buyers based in the storm’s footprint), the storm will cost the industry almost $500 million of activity."

Given its timing during a crucial week in the Presidential campaign season, Sandy could trigger another ad economy fallout: Cutbacks by political campaigns pulling TV and newspaper advertising in the Northeast.

“Many political campaigns save a large percentage of their advertising budget for the final week leading up to the election,” says Rich Swingley, a Ball State University telecommunications instructor, adding: "For those heavily contested races on the Eastern seaboard, we may see a shift away from television and print. There is no electricity for television and the print media cannot be delivered as normal for the next few days.

“Radio may be the big winner, since it is the only medium that can be easily accessed using batteries,” he predicts. “There's no point in spending advertising dollars on a medium that potential voters can't access.”

Pivotal's Wieser, meanwhile, expects that after factoring out the effects of political and Olympic-related spending, third-quarter ad spending will decline 0.5%, and the fourth quarter will drop 1.4% from the same quarters in 2011.
 
"For all of 2012 this would mean a 0% growth for the full year," Wieser explained, noting that the new forecast compares with his previous projection of a 1.2% rate of growth in the third quarter, 0.9% in the fourth quarter, and 1.4% for full-year 2012.
 
"For 2013, we now forecast 1.2% growth vs. 1.7% previously," Wieser said, citing "one bright sign for advertising" -- political advertising "is actually proving to be bigger than we previously expected."
He said Pivotal's updated outlook for political ad spending on local TV will now reach $3 billion in 2012.
 
 

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