• by Joe Mandese , December 12, 2008

Smaller, so-called "long-tail" advertisers who accounted for much of the modest expansion in the advertising marketplace over the past couple of years, have suddenly hit the brakes on their spending, and that is what is accounting for the overall downturn in U.S. ad spending this year. While some big advertisers have slashed spending during the first nine months of 2008, the top 10 U.S. advertisers are off only a smidgen - 0.2% - it is the bottom third of the market that has been cutting back and has contributed the most to the 1.7% decline in U.S. ad spending so far this year, according to figures provided to MediaDailyNews by ad tracking firm TNS Media Intelligence.

 

"If you go back one or two years, when we were seeing modest growth of 2% or 3% in ad spending, the grow was coming from the bottom of the market. Those smaller, long-tail advertisers were in the forefront of the advance. Now they are leading the retreat," explains Jon Swallen, senior vice president-research and the de facto chief economist at TNS MI.

Swallen says that is partly due to the fact that smaller advertisers might be more acutely sensitive to shifts in the economy, and due partly to the fact that many big advertisers had already downsized their budgets at the end of 2007 in preparation for a rough economy in 2008.

"The big advertisers went from a green light to a yellow light, while those smaller advertisers were still looking at green lights," Swallen said. "Now they're hitting the brakes."

While some big advertisers have also hit the breaks, especially two of the Big 3 domestic auto marketers - Chrysler and Ford, both down 33% year-to-date - one has actually been boosting its advertising budget in defiance of an economic downturn: General Motors.

Through the first nine months of 2008, GM boosted its advertising budget nearly 16%, more than any other top 10 marketer, a move that could raise some interesting questions on both Main Street and Capital Hill as the Big 3 automakers have called on Congress fro a multibillion bailout to stay in business (See related story in today's Marketing Daily).

According to TNS MI's figures, GM spent $1.59 billion on measured media spending in the U.S. alone during the first nine months of the year, up from $1.37 billion last year.

During the same period, the total domestic U.S. auto category was down nearly 19%, while imports were down more than 7%. And even relatively strong Japanese marketers like Toyota (-7%) and Nissan (-12%) have been slashing their budgets.

"They've been moving in one direction, and everyone else has been moving in another," Swallen observed, adding that while it may seem counter intuitive, GM's advertising push most likely was a bet that they could ride out an economic downturn and pick up market share during the process. The bet has not paid off. GM's sales are down dramatically, and the economic downturn now looks to be more pronounced and more protracted than when GM adopted the "spend our way through it" strategy.

With acute government, public and shareholder oversight, Swallen questions whether GM can sustain that pattern much longer. "It's lonely standing out there all alone, when everyone else is moving in another direction," he said. "You have to wonder what GM is going to look like coming out of a merger, coming out of a bailout, coming out of a longer downturn in the auto market?"

While other top marketers in big ad categories have been scaling back, it has generally been in the modest single digits, and Swallen said it's possible the auto industry no longer is America's top advertising category, or at least will not be by the end of 2008.

 

Top Ten Advertisers: Jan-Sep 2008 vs. Jan-Sep 20071

 

 

Source: TNS Media Intelligence

¹ Figures do not include FSI, House Ads or PSA activity.