Commentary

Media Recession? Probably Not...

In January, I wrote in this space about the talk of a media recession and discussed that media cost projections tended to be limited to old media that are not growing. My premise at that time was twofold: 1) that new media need to be included in the indices; and 2) that a third party such as eMarketer should be looked at for these predictions, as the agencies that tend to make them are overly embedded in the TV marketplace and not as invested in digital media and emerging technologies.

At the AAAAs media conference, Alexia Quadrani of Bear Stearns (bought by JP Morgan over the weekend!) presented a "cautiously optimistic" "Perspective From Wall Street." Her conclusions bear some attention from those of you who were not at the conference. The big takeaway was that, even in times of recession, media seldom had the same downturn. Yes, there are exceptions but they are few and mostly mild.

I've written before about the Quadrennial effect, and Quadrani reinforced this factor. That is, the Olympics and the elections will be significant factors in upholding the media spend this years -- and have done so every four years since the '70s, without exception. Spending for the elections is expected to total $2 billion this year, and for the Olympics, $3 billion on a worldwide basis.

I believe another factor is that astute marketers know that advertising in a down economy gains market share, which generally is sustained when markets come back. This has been established a number of times in newsletters and research papers from the MPA. Also, we are seeing a mini-trend of overseas companies investing in U.S. advertising in a bigger way. Our analysis shows that, due to the dollar combined with our scale, the U.S. is actually the most efficient place to spend ad dollars in the world right now.

 

Quadrani made a number of other observations. I have included some of them here:

 

  • The national ad market is healthy. Local has been anemic.
  • The shift to digital benefits agencies (complexity is a good thing!)
  • Ad growth was robust in three of the past five recessions: up 6% in 1973-75, 10% in 1980, and 10% again in 1982.
  • 1991's mild recession resulted in slightly negative ad spending, but nowhere near the overall impact of the recession.
  • The 2001 decline in spending was likely more the bubble bursting and 9/11 impact than a pullback.
  • Commodity prices are rising. Companies need to advertise to support price increases.
  • Corporate profits remain healthy, supporting ad budgets.
  • APAC, Latin America and Central/Eastern Europe are expected to continue to grow rapidly

What are your thoughts on this? As always, interested in the dialogue.

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