In October, Goldman Sachs analyst Mark Wienkes predicted that next year, total advertising revenues could fall as much as they did in the recession of 2000-2002--implying an overall decline of up to 7% in 2009. Wienkes added that local advertising will suffer larger losses than national, with local TV station advertising falling by as much as 17%. Wienkes also sees declines of 5% to 10% across radio, out-of-home, magazines and newspapers.
Echoing Wienkes' warning on local broadcast TV advertising, the Television Bureau of Advertising recently lowered its forecast for 2009 even further into negative territory.
According to the TVB, total spot advertising will decline by 7% to 11% in 2009, with local spot down 4% to 8%. In fact, the declines have already begun: The TVB also said that total spot revenues for 2008 will probably come in 7% lower than 2007. The original forecast, released in early September, was revised in October to reflect the rapid worsening of the economic situation.
Radio will also take big hits from collapsing local revenues, which traditionally make up more than two-thirds of its total revenues. For the year-to-date, local revenues are down 8%, and the decline appeared to accelerate in the third quarter, with a 10% drop.
Noting that "October was the 18th consecutive negative year-over-year revenue month and 2008 is the eighth straight struggling year," Jim Boyle, a veteran radio analyst with CL King and Associates, issued this grim forecast: "If the recession lasts for all of 2009 and the weakness persists in many of the major radio ad categories, such as auto, to a point where spending severely plunges, then it may be 2010 or beyond before radio revives."
This situation is nothing new for newspapers, which have suffered local revenue declines for several years running; losses during the recession will be even worse. According to the Newspaper Association of America, the retail category--which includes the bulk of local advertising--declined 0.3% in 2006 and 5% in 2007, during relatively good economic times.
As the situation darkened over the course of 2008, retail fell off a cliff, with an 8.6% decline in the first quarter followed by a 9.5% decline in the second. At this rate, a 10% decline for 2008 seems quite plausible, and the future looks even worse. Robert Coen of Universal McCann predicts a 12% decrease in total newspaper revenues in 2009.
Yellow Pages--long a bulwark of local advertising--will also face a rapid deterioration in the advertising environment, according to Borrell Associates, which predicted in July that print directories would lose about $5 billion of ad revenue over the next five years; that equals about 40% of their projected revenue for 2008.
Borrell says the print directories will see revenues collapse because of competition from the Internet, which provides listings as well as interactivity and a variety of database functions for sorting business listings. Of course, Yellow Pages publishers have seen their own Web portals grow, and will continue to do so. But like newspapers and radio, they are not making enough money to replace losses on the print advertising side.
Local Internet advertising will not be immune from the coming downturn, however. Borrell warned that year-over-year growth will slow from a feverish 48% in 2008--when local online revenues jumped to $12.9 billion--to a much more modest 8% in 2009, when they should reach $13.9 billion.