Blog
Will Advertising spending plunge if the economy gets worse?
7th February 2008
I’m reminded by a recent article that ad-spending usually takes a dive when economic growth slows. Will it be any different this time? Usually, marketing spending is one of the first things companies decide to cut when faced with slowing sales.
Although the economic climate seems to be getting darker, some ad-men expect the knife to cut most deeply in 2009 rather than in 2008. This is mainly because three high spend events—America’s presidential election, the Olympics in Beijing and the European football championship—could add as much as 1% of additional growth to advertising expenditure, partially offsetting the damage from weakness in the world economy.
By contrast 2009 does not have big “quadrennial” political or sporting events, and so could be painful.
However, there are signs that advertising budgets may be more stable than in the past. The internet has brought greater accountability to advertising. Now marketing chiefs can now prove that a click on an online ad produces a sale. Firms are trying to apply the same discipline to television and other media spending.
One quote from The Economist:
“Now when companies raise their budgets they do so more responsibly,” says Jonathan Barnard, head forecaster at ZenithOptimedia (a bid ad agency), “and they’re less likely to see marketing as a frivolous expense ripe for cutting.”
Perhaps the biggest fundamental shift seems to be that underlying growth in ad spending will come mainly from emerging economies as well as advertising on the internet. Emerging markets now represent one-fifth of global expenditure on advertising, and are contributing ever greater sums.
In rich countries the internet is claiming a growing share of advertising—at the expense of traditional media, such as TV and print. Indeed, some people are saying that an economic slowdown is likely to accelerate the shift to the internet.
But The Economist also notes a recent survey of American consumers which found that more than three-quarters of respondents said online ads were more annoying than those in print. Concerned about their privacy, people have started to lobby against online tracking of sales - which is a vital element of the internet’s supposed effectiveness….
Read the Economist article at http://www.economist.com/business/displaystory.cfm?story_id=10567459