• by Fred Geyer , October 8, 2009

The recent announcement by TNS Media Intelligence that advertising expenditures for the first half of 2009 were down by 14% included some surprises for industry observers.

As expected, a portion of the decline was driven by the most troubled sectors of the economy. Automotive: down 31%. Financial services: down 24%. Retail: down 18%. Nor was it a surprise that FSIs, the prime vehicle for delivering coupons, increased by 4.7% or that newspapers continue to struggle in their battle against the Internet. But, even relatively healthy sectors such as consumer packaged goods spent 7% less. A 20% cut by Proctor & Gamble forced it to relinquish the top advertiser spot to Verizon.

The first surprise lay in the size of the shifts from local to national advertising and from print and radio to the two largest multimedia vehicles, national television and the Internet. Within national multimedia, the Internet was up 6% followed by cable TV, down 3.6%, and national TV, down 5.5%. Down, yes, but consider that magazines were down 21%, newspapers were down 24% and radio was down 25%. Both national and local print, newspaper and radio advertising declined in double digits.

Only a portion of this shift can be explained by auto dealers, retailers and travel agencies reducing local spot television, spot radio and newspaper advertising. The biggest shift driver appears to be a flight to quality.

Media mix modeling that Prophet undertakes consistently demonstrates the unique combination of efficiency and effectiveness that national buys of Internet and television advertising can drive. In the past, these models explained why network and cable TV ad rates continued to increase despite the influx of digital competitors. They now indicate that advertisers are shifting away from print and radio's ability to target small segments and local audiences in search of the efficiency of reaching larger audiences with more effective multimedia content.

The second surprise came in the size of cutbacks by small and mid-size advertisers. The top 100 advertisers cut spending by 6% while the remainder of the market cut back by a whopping 22%. In fact, five of the top 10 advertisers increased their advertising spend.

The willingness of the largest advertisers to invest points to their superior financial resources. It is also driven by superior understanding of how to use advertising as an investment to drive growth and resist economic threats. Gaining this understanding doesn't happen by accident. We know from experience that modeling the impact of past investments and implementing ongoing test and learn experiments are crucial to building an advertising investment knowledge base.

The most recent advertising spending data has lessons that should make large and small advertisers distinctly uncomfortable, and beg the questions: Do they understand their spending well enough to ensure they've shifted to the best vehicles for their business? Have they cut too much when they should be investing to protect their business now and prepare to grow as the economy rebounds?