Behind the slower-than-expected recovery
Ad dollars have not returned as quickly as expected
August 30, 2012
The media economy is getting a nice infusion of dollars from political and Olympic spending that will carry through the end of the year. But that boost won't extend much beyond then. Next year figures to be another tough one for ad spending because the economy simply isn't reviving at the pace that economists would like to see. This recovery is lasting longer than they had expected, and there's a potential speed bump looming. Congress is under pressure to resolve the lingering budget issues that threaten to climax in January, when $500 billion in tax hikes and spending cuts are slated to go into effect. The Congressional Budget Office recently predicted that if nothing is done to avert that so-called fiscal cliff, the country would plunge back into recession and unemployment would shoot back up. That would obviously put a huge damper on ad spending. Brian Wieser, senior research analyst at Pivotal Research Group, talks to Media Life about the pace of the recovery, the outlook for print and the potential consequences of the fiscal cliff.
How has the economic recovery changed in the past few months?
Recovery has been tepid at best, characterized by minimal growth and limited confidence across the economy. Economists have generally brought down their estimates for current year prospects in recent months.
Has it been slower or faster than you would have expected two years ago?
Slower, certainly. Most economic recoveries occur much more rapidly than the one we are presently experiencing.
This year there will be a lot of money spent on the Olympics and political ads. Is there any sustainable bump from those extra investments that will carry into next year, i.e. advertisers who got bumped during fourth quarter who might have more to spend in first?
No. Most spending on Olympics and political advertising occurs independently of the overall economy, and arguably neither creates any economic activity–at least none that is directly attributable to the success of the underlying events.
The amount of spending that gets shifted is minimal and would tend to occur in the same quarter. That is to say, if buying local TV ads in battleground states were critical to a campaign, perhaps an advertiser would wait until mid-November, but not until January to launch.
Which ad categories continue to perform the steadiest and why?
We don’t have a particular view on specific categories. Historical data of sufficient quality for proper analysis is non-existent.
Do you think online advertising will catch up to TV over the next five years? Why or why not?
No. Online video remains primarily a catch-up viewing vehicle, and secondarily a promotional one.
The vast majority of TV viewing is passive and attached to the core TV set (or sets) in a household. That infrastructure and related behaviors don’t change very quickly
Are there any bright prospects for print advertising?
Certainly there will be room for niche publications to succeed, especially those primarily dependent upon subscriptions, and presumably print publishers will be able to manage their businesses profitably in years ahead.
However, the top-line revenue prospects for the industry remain as bleak as ever.
What's the most important thing for media buyers and planners to keep an eye on the next few months?
Congressional efforts to resolve the looming "fiscal cliff"–aka “Taxmageddon”–will be critical in determining the health of the overall economy and the media economy in 2013, and this will be the area to focus on in understanding how media owners will fare in the year ahead.
Our forecasts–bleak as they are–assume that there is in fact a resolution to this problem.
However, if Congress does not establish a formula for managing the country’s budgets in a manner that avoids the concurrent pairing of massive spending cuts and tax increases, the economy and advertising will be in for a much worse outcome in the year ahead.
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