We're better off than we think we are

We're better off
than we think we are

Some real good has come from this ad slowdown

By Jon Housman

    By any and all accounts, 2001 was a rough year for the media business.
    Ad revenues fell, properties folded (and few newcomers rose to take their place), layoffs and restructurings hit pretty much every major company, and stock prices took a beating.
    Oh, yes, all this was before Sept. 11.
    Along with the monumental human tragedy, the terrorism and its aftermath have cost the media industry further billions in increased expenditures and canceled advertising revenue.
    So you have to look pretty hard and long to find any silver hiding in those clouds.
    Looking forward, most people are understandably pessimistic, and a common refrain is "It’s gonna get worse before it gets better."
    While we undoubtedly have not heard the last of layoffs or magazine closings, there are several reasons why we can look forward to the media industry gaining some traction in the near to medium term.
    One, things are stabilizing.
    There is a real sense that ad prices have started to bottom out and that the economy as a whole is stabilizing, which is a huge support for deals to get done.
    A good analogy here is the private equity market. Stock prices are lower today than they were a year ago, but more companies are getting funded.
    The reason for this is relative stability: There is less volatility in the markets than there was before.
    The same applies to media buying. With more stable prices comes more confident, structured and longer-term buying.
    Two, the price is right.
    Warren Buffet was famously asked why he seems so happy when stock prices go down. Most of us become rather unhappy to see our portfolios decline in value.
    The Oracle of Omaha replied that since he eats hamburgers every day, he thus rejoices when the price of meat goes down.
     Likewise, since he buys great stocks every day, he does the same for the stocks of the companies he loves, buying more as the price goes down.
     Now, most of us mortals have a natural instinct to automatically assign value to external indicators. In this case, people tend to actually buy more stock when it goes up and then sell when it goes down.
    (Think of your own investing. Be honest. Were you buying more stock in 1999 than you are today?)
    The same holds true in media, where prices have declined as well, and people have reacted by buying less.
    But as people have a chance to recalibrate their radar screens and catch their breath, they will take a sober look around and discover that there are great media values out there. They will start to buy again.
   Three, media groups are lean and mean.
    Well, leaner and meaner than they were a short while back, at any rate.
    Although it has come with a lot of pain, many media groups have made smart cuts that will make them more competitive for years to come. And this is a case where less can mean more, since many business groups are focusing their energy and talent on what really counts: delivering value and service to clients.
    Editorial teams are also finding ways to do more with less.
    Four, marketing executives want to win.
    In the long term, for nearly all businesses there has been no greater driver of premium pricing (and thus superior margins) than a smart marketing strategy supported by a coherent, strong and continuous advertising presence.
    This is true across all product categories and especially so with higher-end goods (think about it, why are you really paying twice as much for one tie as for another).
     Marketing and ad executives know all this, and also that strategic spending in this regard not only boosts margins in the long term but also steals market share from their competitors in the short term.
    That is the kind of opportunity that smart, competitive individuals can only resist for so long.
    It is axiomatic that at the bottom of a business cycle it is difficult to see up, just like it is difficult to see down when you are riding the bull at the top (think 1999).
    And of course, the pain is not yet over.
    But some good reasons are beginning to emerge that lead us to believe things will gradually start to improve as we look back at a very rough 2001 and begin a better 2002.

- Jon Housman is co-founder of Jungle Media Group and an adjunct professor of media strategy at the NYU Stern School of Business. Jungle Media Group is the parent of MBA Jungle and JD Jungle magazines, websites and books.

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