Recession May Affect Ad Biz in 2009, But Outlook for New Media Still Good

January 15th, 2008 Nurlan Urazbaev

Ad Age interviewed leading industry executives about what they think a recession means for their business in 2008.

The consensus is: “It might not hurt in the short-term, but if things don’t tick up, gird yourself for a tough 2009.”

Martin Sorell, WPP Group’s CEO summed it up as follows: “Looking at 2008, there’s the presidential election, there’s the Beijing Olympics, which will probably be the most spectacular Olympics we’ve seen … and there’s the European football championships. So ‘08 is not the issue; ‘09 is.”

I would point out here that fears of recession are mainly expressed in relation to traditional media, where the audiences have been steadily shrinking even prior to any talk of recession.

Most of the new media, however, spearheaded by online advertising and digital out-of-home media (digital signage) shows no sign of a slowdown so far (see our previous posts in Big Picture category).

The looming recession forces marketers to look for more pragmatic allocation of funds. According to Alexia Quadrani, a Bear Stearns analyst: “If it’s a short recession, just a couple quarters, you’ll probably just see a shift (away from traditional brand advertising) to more promotional spending and more accountable means. … If it’s longer, it becomes a global crisis that does a lot more damage to these global networks.”

The most “accountable means” today is online advertising and the most “promotional spending” is shopper marketing. Reports show that the ad budgets keep shifting to online, but online doesn’t have enough inventory to absorb all the money taken out of TV. So my guess is that the unspent budgets are either waiting on the sidelines or being put into digital signage, or both. Apart from the overal increase in Outdoor spending (driven by digital billboards), we may not see it clearly because out-of-home digital (aka digital signage) is not singled out in most of the standard ad spend reports yet.

So far, even from the traditional media perspective, the ad industry looks more or less safe for 2008. Speaking about 2009, factors such as: the fast expansion of digital signage networks, the legitimization of digital billboards, the anticipated introduction of standards and metrics for ad-based digital signage and the continuing aggregation of ad space are likely to fuel steady growth even if the rest of the economy is in recession. 

Entry Filed under: The Big Picture, Uncategorized