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MegaBrands: Net TV, papers, magazines all feel the squeeze; telecom leaders buck the trend

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As the advertising climate turned from overcast to a cold, hard drizzle in the first half of 2001 versus the year-earlier period, a few brands continued to shine. Overall U.S. ad spending slid 6.7% to $44.9 billion, according to Taylor Nelson Sofres' CMR, but while most advertisers pinched their purses, several telecommunications giants opened up their budgets to grab market share.

Not since 1991-92, the last major economic downturn, has overall ad spending been less than the same six-month period of the previous year, according to Ad Age's semi-annual MegaBrands report covering the nation's top 200 brands by media spending. Although collective media spending of the top 200 rose 7.6%, 83 of those brands were down from first-half totals of last year-the most ever during a half-year period in the 12 years of this report.

AT&T MIGHT

The AT&T telecom services megabrand topped all others in the first half by propelling spending 36.8% to $466.8 million. AT&T Wireless, now a separate company after being spun off from parent AT&T Corp. in July, budgeted more than $220 million on measured media.

Not to be outdone, the Verizon telephone services megabrand kept up the pace by increasing its media outlays 45.9% to check in at $284.1 million, just ahead of General Motors Corp.'s Chevrolet vehicles megabrand, top brand in first-half 2000.

The 11 telecom brands in the top 200 spent $1.7 billion in the first half, up 46.1%, one of few categories to show significant growth. AT&T, Verizon, Sprint and Cingular Wireless, the top four telecommunications megabrands, outspent the combined total of the top four automotive megabrands-Chevrolet, Ford, Toyota and Chrysler.

The top four telecommunications brands increased their dominant hold on the market. Through the third quarter of 2001, Verizon, Cingular, AT&T and Sprint accounted for two-thirds of the 123 million wireless phone subscribers in the U.S.

Verizon holds the largest share with 28.7 million subscribers through September, 2001. All four posted double-digit growth in the numbers of subscribers over last year, averaging a 23% increase between them.

According to a J.D. Power & Associates study, 52% of households in the 25 largest markets use a wireless phone, and the large ad budgets reflect the telecom companies' desire to get a foothold in the other 48% as the industry expands wireless e-mail and Web service roles.

This is a far cry from the first half of 1991, when AT&T was the only telephone megabrand ranked in the top 30 and the telecom category accounted for only $295 million of top 200 spending.

But there are many similarities between these two time frames 10 years apart. The economic recession that hit the end of 1990 and carried through 1991 brought ad spending down 7.8% to $18.4 billion in first half '91, according to Ad Age's MegaBrands report from November of that year.

FOUR MEDIA THE KEY

That report showed that each of the top four media-network TV, spot TV, newspapers and magazines-suffered from decreased advertising. Those same four media are down in 2001. Additionally, economic data for third quarter 2001 show the largest drop in gross domestic product (-0.4%) since first quarter 1991.

Spending by the automotive category, the largest among the top 200 brands, shrunk by 5.2% in first-half 2001. GM, the nation's largest advertiser and parent of nine of the top 200 brands, cut back media by 24%. GM announced in December 2000 it would phase out the Oldsmobile division; Olds' media fell by 30%. GM also slashed magazine spending by 23%, including calling a temporary halt to advertising in the magazines of Advance Communications' Conde Nast Publications this spring to examine its effectiveness in print media.

Despite the cutbacks GM's overall market share, slipping for some time due to increased sales from imports, stood at a stable 28% through September, only 0.3% off of last year, according to Automotive News, sibling publication of Ad Age. Through the third quarter, total U.S. auto sales were down 5.7% and market share for the Big 3 was off 3.1%.

Retail ad spending remained stagnant among the top 200, edging up a nominal 0.4%. The Sears department stores megabrand, which once stood atop the ranking with full-year '97 media expenditures of $665 million, set the tone for retailers in this ranking with a flat budget of $210 million (down 0.1%). Most department store brands spent less in 2001. Macy's, J.C. Penney and Dillard's were down 8.6% combined. For every Target (up 15.6%) there was a Kmart (down 9.1%).

PRINT TAKES A POUNDING

Since the dot-com heyday that bulked up many newspapers and magazines, print has taken a beating. Print outlays for all advertisers dropped 8.4% in the first half, punishing newspapers (-11.4% combined) and magazines (-4.2%) and even influencing the shuttering of new-economy magazines. Retailers in the top 200, print's bread-and-butter, cut spending in print by 12%, hitting newspapers especially hard. Sears alone shifted more than $35 million from print to broadcast.

According to CMR, spending from Web sites and Internet service providers plummeted 44% in the first half of this year from a total of just over $1 billion spent in the category in first-half 2000. Print suffered most, receiving 68% less. Still, the category's falloff didn't devastate the overall media climate: the total dollar loss from the previous half year was only $445 million, and removing the numbers from both this year's and last year's totals still shows all ad spending down 5.9%.

It appears certain there will not be any sort of improvement in the second half in the wake of the Sept. 11 terrorist attacks in the U.S. Current reports are bleak for all media.

According to Publishers Information Bureau, consumer magazine ad pages were down 9.9% in September, after falling 12.3% in August. Newspapers suffered steep declines in classified and help-wanted revenue related to the softening businesses climate. Network TV was affected by a self-imposed ad-free environment in the days following the terrorist attack.

Amid the atmosphere of uncertainty and fear, marketers are looking to minimize loss but also capitalize on shifting desires of consumers. Identifying where consumers will put their money will be challenging, but it's worth noting that the top 200's percentage of all media jumped 5 percentage points to 37.3% in first-half 2001 and 4.7 points to 40.6% in first-half 1991. Typically, the top 200 account for a stable one-third of all media at any given time. As the budgets of smaller brands contract in difficult times, these elite brands gain even more importance among the nation's media.

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