Analysts: Don't count on ad gains in '09
EmptyThree of the ad industry's top forecasters couldn't see much cheer for 2009, and perhaps longer, in their annual prognostications.
IPG's Robert Coen, GroupM's Adam Smith and ZenithOptimedia's Steven King all forecast a gloomy year ahead. The decline in what should have been a robust 2008 thanks to record spending for Olympics and political ads began in the third quarter.
GroupM says 2008's ad spend will be flat in the U.S. and decline 3% in 2009. ZenithOptimedia sees a 6% decline in ad spending in North America next year, though even that is "exceptionally uncertain." IPG split the difference, with a 4.5% year-over-year decline for 2009. UBS weighed in with a global ad spend increase of 4% in 2008 and a decline of 4% in 2009.
"Everybody is very clear that next year will be hugely challenging," King said Monday in the opening session of UBS' 36th annual Global Media and Communications Conference in Manhattan.
Few wanted to take a swing at any possible recovery in 2010, either. Part of the reason is that advertising is a trailing indicator of good or bad things happening in the economy. The other, quite simply, is that no one knows whether the U.S. or global economy has hit bottom or when it will happen.
"During a recession, advertising you could expect to take a bath for a couple of quarters," Smith said. "This one feels like it'll be four quarters."
That means at least the end of 2009.
King agreed that the bottom might not have been hit yet. He said that things are much different than they were four to six weeks ago and that the once-quarterly advertising forecasts are now being done monthly because of the volatility.
Said UBS analyst Matt Coppet, "2010 will remain below par in our view." That's even with an expected 4% improvement over 2009's ad spend.
A standing-room-only audience crowded into the Grand Hyatt ballroom to hear what was no doubt one of the gloomiest forecasts in the 36 years of the UBS parley. Coen offered that the mid-1970s recession and ad economy felt worse than this one, but he may not have reassured many in the room. And no one argued with an audience member who said that the conditions and outlook were just plain lousy and that the U.S. ad economy is in for a huge hit.
Another audience member looked at history — when the ad economy bounced back in a major way from the lows of the mid-'70s and early '80s — and tried to make a case for how the ad market and economy might come back in a big way.
But no one behind the microphone was willing to make that leap.
"It would be inappropriate and unprofessional" to make that kind of assumption, King said. While they all hope for a bounce-back the way it happened then, it wasn't something that was shown in the data.
WPP CEO Martin Sorrell said in a separate presentation later in the day that an improvement in the day-to-day world won't happen until 2010. He said the financial markets would be the first to recover in 2009 but that things won't improve elsewhere in the economy, including in advertising, until later.
Sorrell also hit back against what some have said is a "limited visibility" into next year's financial condition.
"It's not a lack of visibility. … They don't like what they see," he said to the nervous laughter of many in the room.
Meanwhile, a network TV researcher painted a bleak picture for the 2008-09 season financially and in the ratings. But he said things will improve by the end of next year.
CBS chief research officer David Poltrack, who has weathered four recessions in his long career at the company, said that the economy has gone south and taken network TV with it. Poltrack forecasts that network TV advertising will be up a mere 1% in 2008 and down 7% in 2009.
That compares with his previous prediction of network TV advertising jumping 7% in 2008, including a 2% rise thanks to the Olympics and a strong upfront. But the nets got a double shock: the impact of the writers strike in the first half of 2008 and the declining economy in the second half. The fourth-quarter scatter market was weak.
As for when the recession might end, Poltrack wasn't as negative as some analysts. His message? This too shall pass. The impact of the recession will lessen during each quarter of 2009, he said.
"The end of the recession will at least be in sight by the fourth quarter," Poltrack said. He said the fourth quarter also will look better than 2008's because networks will be able to fully program — and rake in the ad dollars from — five nights that it couldn't this fall because of the election and primaries. (partialdiff)