Behind the better
fourth quarter numbers
There were several forces boosting ad spending
By Diego Vasquez
Mar 22, 2010
Ad spending isn't trending up yet, but it's finally stopped what seemed in 2009 to be an interminable string of double-digit declines. Fourth quarter ad revenue was off 6 percent, according to numbers released last week by Kantar Media, formerly TNS Media Intelligence. Full 2009 spending declined 12.3 percent, to $125.3 billion, compared to a 14.7 percent pace during the first three quarters. Some of that decline is based on the fact that it followed a year with significant political and Olympic spending, which totaled billions of dollars. But the recession walloped virtually every category, and it was only in fourth quarter that some media began seeing year-to-year growth, helped by the fact that fourth quarter 2008 was pretty dismal as well. Network TV was up 4.1 percent in fourth quarter, and cable rose 2.7 percent. Sunday magazines (3.6 percent) and national newspapers (0.4 percent) also increased. The only categories to end full-year 2009 in positive territory were the internet and free-standing inserts, with radios, newspapers, magazines and outdoor all declining double-digit percentages. Jon Swallen, Kantar's senior vice president of research, talks to Media Life about first quarter 2010, why General Motors was the exception rather than the norm, and what categories will still have a tough 2010.
What categories are most responsible for the pickup in spending in fourth quarter? And why was TV the beneficiary of so much of that?
The categories that were performing strongly were telecom, pharmaceuticals and department stores. Department stores was connected to the holiday season.
All of those categories are major TV advertisers, so the pickup in those categories proportionately benefited television.
How has the momentum of the fourth quarter played out in the first quarter of 2010? Put another way, was it an isolated lift or was it really the beginning stage of the long-awaited recovery?
There seems to be some carryover.
First quarter is pacing ahead of fourth quarter, but it’s unevenly distributed. TV and internet are certainly at the head of the pack in first quarter, newspapers and radio are sort of in the middle.
And magazines are now lagging behind. They’re certainly performing better than three or four months ago, but they haven’t rebounded as vigorously as some of the other major media have.
Fourth-quarter 2009 obviously compares to fourth-quarter 2008, a period of massive political spending. How much better would the quarter had done if you took out political spending from the equation and compared the two quarters side by side?
I don’t know.
Political was certainly a major factor in fourth quarter, but I haven’t been able to figure what would have happened if political wasn’t there. But the reality is, it was there.
It appears national newspapers saw a healthy bump in fourth quarter in particular. What sorts of spending drove that?
Definitely a pickup in retail advertising, especially department stores. And also some improvement from auto, particularly from domestic manufacturers. Not so much from dealers.
What, if anything, surprised you about the full-year results? Were you surprised by the strength of fourth quarter?
I look at numbers on a month-by-month basis, and October was still looking a lot more like January through September, but then all of a sudden November looked a whole lot better.
Part of that was the holidays and overall confidence in the state of the economy, so those two things together contributed to the pickup in the last half of the fourth quarter. Also, the comparisons were against very low levels from a year ago, but we’re starting to see the losses shrink. I think those were the factors that drove it.
Internet did well for most of the year but dipped in fourth quarter. Any reason why that you can put your finger on?
Nothing in particular. Internet held up pretty well most of the year and was turning in low single-digit gains. So the story behind internet was the consistency throughout the year. It certainly held up better than the other major media types.
We are always looking at automotive spending, and one curious thing is that while automotive spending was down a hugely, 23.4 percent, in 2010, GM actually increased its spending, even though it went into bankruptcy in June. Who then was cutting their spending if not GM? And did we see a big recovery in automotive spending in fourth quarter?
GM and Ford were increasing their spending, and Chrysler cut its budgets dramatically. Like GM, they went through bankruptcy, but unlike GM they didn’t resume marketing at very high levels. And then when you go down the roster of major Asian nameplates, all of those manufacturers throughout 2009 cut budgets sharply and held to those budget cuts.
In a way, Ford and GM were almost the exceptions. New sales were down somewhere between 25 and 30 percent, and not coincidentally ad spending was off by a roughly comparable amount. So it’s kind of in line with the sales decline.
So the Asian manufacturers, their spending was in line in the reduction in sales. But GM’s sales were down 30 percent, yet they spent 1.2 percent more on media advertising. Also, Ford had a very small sales decline last year and they increased its ad budgets. So those two were the exceptions.
The recovery was kind of limited to GM and Ford in the fourth quarter, it wasn’t the category as a whole.
Why did auto dealerships cut back more than manufacturers? Was it because so many were closed?
That’s a small part of it. The impact of dealership closings was delayed because many of the dealerships appealed and were able to stay open for much of the year.
I think the bigger factor is the decline in car sales. Local dealerships tend to spend a certain amount per vehicle sold, and when sales slow down, budgets slow down. They’re tracking business every week and every day and adjusting ad spend almost immediately.
Which categories will continue to struggle the most in the coming year?
I still worry about local services, which is if you think of local market advertisers – retailers and service businesses – these are the service businesses. Local doctors, landscaping services, architects—it’s a broad range of companies and they tend to have small budgets. They are the definition of local advertisers because those are consumer-facing businesses and their cash registers ring every day.
I think they’re one of the categories that’s more economically sensitive. So ad spend scales up or down very quickly in relation to sales performances. So that’s a very good bellwether for the general economy. It looks like the recovery is underway, but there are still some obstacles out there.
You note that cable TV expenditures were down just 1.4 percent "helped by an expanding amount of commercial time." Why was commercial time expanded? How much of a lift did that give the category?
Ad time was up 1.9 percent. Ad time has been increasing in cable very slowly for quite a period of time. And the increase last year was a little bit larger than we’ve normally seen.
One hypothesis is it may have been an increased number of makegoods to advertisers for ratings shortfalls—that’s one possible explanation. A companion explanation could be in a down economy, where revenues are coming up short, you try to sell more inventory to make up for it.
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