The list of statistics that perhaps ought to alarm b-to-b marketers is growing longer. Oil futures set a record last week by closing at more than $61 a barrel. The Federal Reserve has raised interest rates for eight quarters in a row.
Forecasters at Universal McCann and Merrill Lynch cut estimates for advertising spending for the rest of the year, although these prognosticators are still predicting growth.
But so far, statistics measuring ad spending and interviews with a cross section of executives in marketing communications indicate that overall b-to-b marketing spending in the U.S. is growing moderately, which is likely a good sign for the economy at large. That’s because b-to-b marketing expenditures are like canaries in the economic coal mine; they go first when problems are coming.
Marketers’ mood `not heady’
"My sense is that the canary is still full-throated," said Rick Segal, CEO of advertising agency HSR Business to Business.
Segal said his business is growing along with the economy and that he expects revenue growth in the low single digits this year. "It’s not heady," he said of the mood of his clients, "but it’s confident." Segal did acknowledge that some of the economic indicators could be characterized as "inconsistent."
For instance, the CIO Confidence Poll from Forrester Research, which was released in June, found that only 11% of CIOs expect "worsening conditions." At the same time, that figure was more than twice that of the previous quarter.
However, a poll conducted by Penton Media’s Windows IT Pro group, also released in June, found that IT executives were growing more confident. The "IT Industry Trends Study" found that 53% of companies surveyed expected to increase IT spending over the next 12 months, up from 46% a year earlier.
Back on the gloomy side, a CFO magazine poll of its readers found that executives around the world were concerned that rising health care costs, interest rates and oil prices would reduce planned hiring and capital expenditures. The CFOs surveyed also said they lacked the pricing power to pass on these increased costs to their customers.
There were also some positive findings in the CFO survey. A significant portion of individual CFOs said they were optimistic. For instance, 40% said they were more optimistic about the outlook than they had been the previous quarter, which points out the obvious truth that economic health-and advertising spending-varies from sector to sector.
While Business Information Network (BIN) figures, which are tabulated by IMS: The Auditor for American Business Media, show that overall ad pages are essentially flat, with a decline of 0.82% in the first four months of this year, some markets are up and some are down.
For instance, the agriculture (6.74%), architecture (4.63%), banking (2.32%) and retail (1.66%) sectors all posted growth in ad pages, according to BIN. But electronic engineering (-7.53%), computing (-5.28%) and travel (-7.56%) were down in ad pages.
High-profile b-to-b marketers are not uniformly up or down in their individual advertising expenditures, according to figures supplied by TNS Media Intelligence. The two b-to-b marketing giants of the tech sector both cut ad spending in the first four months of this year. IBM Corp. spent $108.9 million in that period, down about 17% from a year earlier. Microsoft Corp. spent $155.2 million in the first four months of this year, down about 26% from the year earlier.
Also down in ad spending was General Electric Co., which spent $278.1 million in the first four months of this year, a drop of about 6%. Thanks to its new "Ecomagination" campaign, GE will likely accelerate its ad spending for the rest of the year.
American Express Co. increased its ad expenditures to $146.4 million in the first four months of 2005, a jump of about 25% over the same period last year. Similarly, United Parcel Service of America boosted its ad spending to $77.0 million, a 10% increase over the same period last year. At $49.9 million, FedEx Corp.’s ad spending for the first four months of this year was essentially flat.
Paul Mackler, CEO of Cygnus Business Media, said his company saw higher revenue in the first half and that he expects the trend to continue for the remainder of the year. Of the 15 market sectors that Cygnus serves, only three are down so far this year, he said. Of the three down markets, two are undergoing rather severe structural changes: photography and printing.
"It’s a rising tide," he said, "but it doesn’t lift all boats." Another media company, ZweigWhite, which focuses on the construction industry, has also been enjoying fairly strong growth. Jeff Blumberg, ZweigWhite’s CFO, said he hasn’t seen any effect from rising interest rates or gasoline prices on marketing spending in his company’s products. "It hasn’t affected advertising yet," he said. "Will it happen? There’s always that chance."
One uncertain factor going forward is the potential economic impact of last week’s terrorist bombings in London, which initially roiled European markets. Overall, however, Western capitalist economies-at least from a financial point of view-appear to have adjusted to occasional terrorist strikes, realizing, perhaps, that such attacks are anomalies and don’t appear to have the power to shake up business in the long term.
In his blog, Barry Ritholtz, chief market strategist for the Maxim Group, wrote, "Given the size of the global capital markets (hundreds of trillions of dollars) we saw that even 9/11 caused a temporary aberration. It’s hard to even pick out 9/11 on a 10-year chart of the NASDAQ."