Television advertising in the recession

We’ve often looked at ways in which firms are being affected by the looming recession. One obvious impact is on marketing, and promotion in particular. One widely quoted belief is that advertising budgets are the first to be axed in a downturn. A recent article in The Economist seems to back up this view, but the picture is more varied than you might think. Yes, TV advertising in the United States is taking a beating. But the use of other media and growth in emerging markets is taking up some of the slack.

The Super Bowl attracts more viewers than anything else on American television. All the advertising slots for the 2008 Super Bowl had been sold by the end of November 2007, despite the $2.6m price of each. For 2009 the price has risen to $3m, but at least ten slots (out of 67) are still looking for a buyer.

General Motors, which ran 11 ads on Super Bowl Sunday in February 2008, has already said that it will not run any in 2009. America’s two other big carmakers, Ford and Chrysler, are likely to follow suit. In a sign of the times, Monster.com, an online job-search company is buying a slot.

The article quotes forecasts for next year say that ad spending in America will decline by 5% or more. Much depends on the fate of the car industry: carmakers and dealers normally spend around $20 billion a year on advertising, but Chrysler and Ford scaled back their expenditure by more than 30% in the first nine months of 2008, and are expected to make further cuts in 2009 as they struggle for survival. Further evidence that the fate of many firms is tied up with what happens in the collapsing car industry.

One survey predicts that total spending on television ads will fall by almost 9% next year. Only newspapers, where a decline of 12% is expected, are forecast to fare worse. Advertising agencies are already suffering as their clients cut spending. Critically, the mood is changing. Expect to see far fewer flashy adverts to reflect this. More bad news for advertisers.

The bright side: another prediction that 89% of all growth in advertising spending between 2008 and 2011 will take place in developing countries. In the (currently) bright prospects of India, China, Indonesia, Vietnam and Brazil, television remains the most popular advertising. Strong growth there may help offset the declines in North America and Europe.