The current media and advertising recession will be more severe and more transformative than any one of the last 80 years. This will be a time when it won’t be just about how far down ad spending goes, but also about what media entities and even business sectors will survive.
Historically, advertising recessions have been 1-2 years in length and have been about a contraction in ad spending on measured media. Everyone hunkered down, altered pricing strategies, leaned on relationships and waited until the inevitable spending upsurge occurred. The advertising recession of 2008 – 2010 will be different. This time, entire structures on both the buy and sell side will collapse. The institutions that were developed and rigidified in the 20th century are clearly not mirroring the dynamic changes of the media marketplace in this new century. The advertising agency constructed in the second half of the last century no longer reflects the media reality of today. The same can be said of the hierarchical distribution channel specific media sales organizations. There are agencies and media properties that exist today that will either cease to exist or will survive in substantially altered forms by 2011.
The early warning signs have been apparent for a year. For the past four decades, the quadrennial election and Olympic years were guaranteed to be up years when compared to the prior year. Dramatic increase in ad spending by political candidates fueled all media, though TV most of all. The Olympics and all the programming leading up to it, commanded outsized specially appropriated ad budgets from major advertisers. A rising tide lifted all boats. The worry was the year after and the inevitable decline of year to year spending. Well in 2008 that changed. Ad spending in almost every media category except interactive declined significantly. Newspapers went into a free fall with revenues down 20-40%. Most categories of TV were down single digits and magazines declined in the low double digits. All this occurred in a year of one of the most significant Olympics and Presidential campaigns in history.
A shift is occurring. Fear is rampant in the top level executive suites of advertising and media. There is vested interest institutional blindness in top corporate executive suites. Why? The past is no longer a barometer of what might happen. What always worked no longer does.
Evidence of this collapse is everywhere. It was an axiom that the low cost direct response ads (“this is a one time offer, but wait, there’s more!) and infomercials only ran during late night and over night and were never seen in other programming except in traditionally slow advertising times of year such as the weeks right after Christmas. In 2008, particularly in the fall and continuing to today, such ads were all over network newscasts, primetime broadcast networks and everywhere on cable regardless of the time of day. As someone who had a lengthy career in television sales, this situation jumped out at me as extremely unusual and unprecedented.
In just January 2009 alone some 15-20 magazines have ceased publication. Pick up almost any national magazine and it feels very thin compared to a couple of years ago. There are just not the ads anymore. Have you noticed how many more hours of commercial-free music are heard on radio these days? All these developments are due to several significant developments.
Major advertising categories such as financial services, automotive and airlines are all industries undergoing severe problems and have dramatically cut advertising particularly on television. This recession is unique in that the top end luxury category of goods have sustained 20-40% drop in sales, dramatically impacting magazine ad revenues. Most significantly billions of dollars have migrated to the Internet from more traditional media. That said, even the growth of interactive ad revenues has dropped dramatically from high double digits to low double digits.
Yes, at some point in the next two years the economy will start to grow again. By the time it does however, there will be a much longer list of magazine and newspaper titles that will have ceased publication. There will be mergers in the television and radio businesses as companies try to survive. The advertising agency business and most certainly the structures within that business will be dramatically altered. This advertising recession is not one about holding on until the good times return. It is about a historic recalibration, reorganization and, for those that survive, a transformation of the processes, practices and structures of the entire advertising business.
The advertising recession of 2008-2010 is a threshold event in that a decade from now it will be viewed as the transitional time between the traditional advertising model of the 20th century and the new emerging model of the 21st century.