CFWV.com - Cluster Article

•

PDF

The Winners and Losers of the Advertising Downturn

Nowadays, companies can advertise in more ways than ever before -- even online. However, challenging economic times have halted the boom in advertising spending that started the decade.

Advertising spending for all media was down about six percent in the first half of 2001, compared to 2000. Those numbers come from CMR, a New York company that provides strategic advertising information.

However, some companies see an opportunity when others reduce their advertising spending.

Microsoft, for example, recently launched its biggest advertising campaign in more than five years. It purchased the rights to Madonna's song Ray of Light to help promote its latest product, Windows XP, in television ads.

Microsoft bucked the trend to slash advertising costs. According to some experts, it's a decision that could pay off in the long term.

"Most of the nation's top advertisers slashed their budgets during the first half of 2001," according to CMR. "The top spender, General Motors, cut a significant 23.5 percent of its ad spending from the first half of last year, trimming $1.4 billion down to $1.1 billion."

Even the advertising industry's newest baby, online advertising, couldn't escape the shadow of economic clouds. Online advertising spending dropped 10 percent for the first half of 2001, compared to the first half of 2000, according to CMR.

Why the Downturn?

First, not everyone agrees that the industry is in as big a downturn as the numbers suggest.

Stu Ginsburg works for the Interactive Advertising Bureau. He explains that it's difficult to put an exact figure on how bad the situation really is. That's because it's being judged against 2000, which was one of advertising's better years.

In fact, 2000 was a record year for the advertising industry. That's according to MarketResearch.com. It reports that advertising spending increased 10 percent from 1999 to 2000.

That, however, was the end of that.

Mary Hilton works for the American Advertising Federation. "It is true we are facing challenging times, due largely to the downturn in the nation's economy," says Hilton.

"However, we had already seen an industry dip this year, due to the collapse of the dot-coms and the lack of major ad-spending situations, such as the Olympics and local and presidential elections."

Who Gets Hurt?

Just about every sector is impacted. That's according to Brent Bernie. He's the president of a media research company.

"Advertising will tend to slow down in difficult economies as companies look to save discretionary spending dollars," says Bernie. "It's often a function of things becoming more last-minute, then actually slowing down. That is, clients wait to see how sales are in a week or a quarter. Then they adjust their ad spending accordingly."

Fewer ads mean fewer jobs. For example, Hoover's, an online business information provider, announced plans to reduce its workforce by 20 percent in September 2001. That's according to CBS MarketWatch.

"In the advertising industry, just as in other industries, consolidation is causing job losses," says Ginsburg. "Companies are merging, and jobs in all sectors are being lost. Notably, magazines are feeling a decline in advertising. Many reporters and editors have lost positions."

As the economy gets better, however, Ginsburg believes many of the jobs will come back.

Internet Advertising: A Bright Future

In the U.S., online advertising revenues exceeded $8 billion in 2000. That's according to the Interactive Advertising Bureau.

"Internet advertising is still a small piece of the pie, but it is growing," agrees Bernie.

"It is also important to realize that the Internet is seen by marketers not only as an advertising vehicle, but also as a channel of distribution. Therefore, dollars also come to this medium from marketing and promotional budgets, not just ad budgets."

Online advertising is being integrated into overall campaigns. This is also affecting jobs in the advertising industry.

"With the convergence of media and ownership," says Bernie, "media owners are trying to offer clients new approaches to reaching customers that use multiple media types in their stable, such as TV, print and Internet from the same company."

"Meanwhile, clients are looking for new and innovative ways to cut through the ad clutter and reach their customers."

Advertising to the Advertisers

The advertising industry is trying to help itself. One way is through industry-targeted advertisements. The American Advertising Federation, for example, has embarked on an unprecedented $4-million "Great Brands" campaign to encourage companies to advertise.

"We are educating top corporate decision-makers that advertising is imperative to building brand identity, market share and stockholder value," says Hilton.

College Foundation of West Virginia (CFWV)

College for West Virginia (CFWV)

The Winners and Losers of the Advertising Downturn

Links