Ad Industry Optimism Reaches Highest Point Yet: Improves For All Media, Especially Digital

Advertiser optimism toward their media spending, which bottomed out a year ago, continues to rise and is now at the highest relative point since a well regarded research company began tracking it three years ago. Nearly a third (32%) of ad executives now expect to increase their ad spending over the next 12-months, marking the greatest percentage since Advertiser Perceptions Inc. (API) began asking that question in the spring of 2007.

Conversely, only 22% said they plan to decrease their ad spending, marking a positive 10 percentage point difference between those planning to increase or decrease their advertising budgets, which is the basis of API's advertiser optimism index.

That compares with a negative five percentage point index in the spring of 2009, when API executives say the advertising recession effectively "bottomed out," and signals that Madison Avenue is firmly on the path to a sustainable recovery.

The findings correlate with recent upgrades major industry analysts have made to their overall ad spending forecasts for the U.S. and global advertising marketplaces over the next 12-months, and raises questions about whether the ad industry is a "leading" indicator for a general economic recovery, or whether it is a "lagging" indicator of more systemic macro economic problems.



"The answer is pretty simple," said Brian Wieser, the global director of forecasting at Interpublic's Magna unit, who recently issued his most optimistic outlook for the U.S. and global advertising economies since the global economic recession began. "It's tightly related, but it's concurrent - not leading, not lagging."

Wieser, who is more or less Madison Avenue's de facto chief economist, says that the "best fit" on the role of ad spending as an economic indicator is, "measured as correlation.

"Between changes in virtually any economic variable and total advertising revenues are always concurrent (comparing same quarter to same quarter or same year to same year)," he said. "The correlations are much lower when you look at it on a lagging or leading basis, and whether you look one quarter or two quarters ahead or behind."

Ken Pearl, one of the partners of API, said he still considers advertising to be a lagging economic indicator, but he noted that "advertiser optimism" is a leading indicator of advertising spending, and therefore is a key perceptual metric for Madison Avenue to follow.

"Advertiser optimism leads ad spending. Based on that, I think that advertisers are feeling better about the economy, or at least, more comfortable about the reality of economic uncertainty, which in either case will positively affect ad spending," he explained.

Pearl noted that the optimistic momentum has been building since last year, and that for at least the near term, "We're moving in the right direction."

If that's true, it should be good news for all the media, because the sentiment among ad executives is improving for every single medium, even supposedly business model challenged ones such as newspapers, magazines and radio.

While magazines and national newspapers continue to be the only media yielding a net negative difference (minus 10 percentage points and 32 percentage points, respectively), they both mark substantial improvements from a year ago (when they were minus 26 percentage points and minus 46 percentage points, respectively).

Broadcast TV has flattened out to zero percentage point difference, following three consecutive years of erosion in advertiser confidence, and all other media are ascending, especially digital media (plus 60 percentage points), and particularly mobile (plus 62 percentage points).

The current sentiment reflects the responses of 1,412 ad executives - both marketers and agency media buyers - to interviews completed online in April/May 2010, and is being published here for the first time.

1 comment about "Ad Industry Optimism Reaches Highest Point Yet: Improves For All Media, Especially Digital".
Check to receive email when comments are posted.
  1. Fred Jones, July 8, 2010 at 11:28 a.m.

    Marketers don't use direct mail because they have extra money, they use it because it works better then any other media at what they are trying to accomplish.

    No rate increase in 2010, we knew this was coming. Get over it. It's not like my digital agency is giving me a discount for all the email and SEO I use..

Next story loading loading..