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Agencies reeling as ad projections spiral downward

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Companies dependent on advertising revenue are feeling the effects of the Sept. 11 terrorist attacks, prompting them to lower projections for this year and next.

On Oct. 1, media reporting company CMR, a Taylor Nelson Sofres company, said network, spot and cable TV lost a combined $312.2 million in advertising revenue for the week of Sept. 9-15, as networks cut advertising for continuous news coverage. CMR said ad revenue for the year could be down 6% to 8%, compared with an earlier projection of a 2% to 4% decline.

Also on Oct. 1, Goldman Sachs Group Inc., citing the terrorist attacks and weakened economy, revised its ad forecast for 2001 to a 9% decline, from an earlier projection of a 4.5% decline. The company expects a 4% drop next year, compared with an earlier projection of a 1.8% gain.

At a Goldman Sachs conference on Oct. 4, executives from the largest ad agencies said it would be hard to meet their financial projections this year and that they don’t see business improving any time soon.

Six down quarters

John Dooner, chairman-CEO of Interpublic Group of Cos. Inc., the largest agency holding company in the world, said it was tough to predict when the ad market would pick up, but he doesn’t expect it to happen in the next six quarters.

Martin Sorrell, CEO of WPP Group Ltd., London, said in a presentation that his company still plans to hit earnings per share growth of between 15% and 20% in the "long run," but it won’t be easy to hit that goal this year or next.

Last week, WPP attempted to withdraw its takeover bid for U.K. media-buying agency Tempus Group, saying the attacks altered the outlook for Tempus’ operations.

New strategies

Advertisers and agencies are evaluating strategies to help them recover from the economic hit.

"As the advertising industry regroups in this extremely unsettled environment and difficult economy, marketers will be best served by staying very close to their customers in order to understand their changing moods, new priorities, goals and heroes," said John J. Sarsen Jr., president-CEO of the Association of National Advertisers Inc.

Some agency executives said they’re already seeing a shift in how they do business in a post-Sept. 11 environment. "People are re-evaluating their lives, their careers and their relationships, both personal and business," said Don Maurer, president-CEO of McKinney & Silver, Raleigh, N.C. "In that kind of mindset, there is enormous pressure on business to succeed."

Maurer predicted more advertisers will put their accounts up for review as they look for partners who can serve them better in a more difficult business climate. "How you compete changes. The strategy changes from the medium- and long-term focus to the short-term focus," he said.

Jim Moore, exec VP and managing director at IPG’s Foote, Cone & Belding, New York, said the agency will not change strategies or business models, but it will be more aggressive in going after new business. "As we move into 2002, we’ll shift our resources and focus to new business," he said.

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