First-Half Ad Spending Declines

Second Quarter Marks Biggest Quarterly Drop Since 2001

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NEW YORK (AdAge.com) -- No matter which way you slice it, the first six months of 2008 have been a disappointing two quarters for everyone.

Total measured ad spending declined by 1.6% in the first half of 2008 compared with the same period in 2007, according to TNS Media Intelligence. The second quarter alone was down 3.7% over last year, marking the biggest quarterly drop since 2001.

Among the media most affected was broadcast TV, which dropped 2.4% overall due to the writers strike. Cable TV (3.1%) and national syndication (10.2%) got a boost for having comparatively fresh programming schedules.

Dollars reallocated
But Jon Swallen, senior VP-research at TNS Media Intelligence, said not all of the TV dollars that normally would've gone to broadcast prime-time programming were reallocated to other parts of TV. Many companies held on to some of their marketing dollars to bolster their bottom lines in anticipation of a recession, as shown by spending cutbacks from the likes of Procter & Gamble (the biggest spender despite a 7.6% decrease) and AT&T (down 15.6%.)

The continually troubled auto category also posted mixed results, with General Motors Corp. boosting its spending by an impressive 12.9% (largely to support its new Chevrolet Malibu and Cadillac CTS redesigns). Ford Motor Co., on the other hand, fell out of the top 10 biggest-spending advertisers in the first half of 2008, dipping below PepsiCo (up 5%) and Kraft Foods (down 6.7%).

Other notable categories include magazines (down 1.8%), newspapers (down 7.4%) and radio (down 6.5%). Even outdoor and internet display advertising, the only two categories to post overall spending increases, are growing at a more sluggish rate than in years past.

Mr. Swallen said the rate of growth in internet display has been slowing in recent months, having traditionally posted quarterly growth rates as high as 14% only two or three years ago. "It could be one of two scenarios," he said. "Display advertising is losing favor with advertisers relative to other digital internet ad forms, like search, video, etc. So perhaps search is becoming the ugly cousin, relatively speaking. Or it could be sort of a bellwether indicator indicative of the malaise in ad-spending across the board, with advertisers cutting back on internet display the same way they're cutting back on TV, magazines, etc."

Online still not threat
Although online video advertising is beginning to gain marketplace traction as a viable alternative to TV spending, Mr. Swallen doesn't see it as a big threat to display just yet. "I don't think video is in a position where it's siphoning off huge amounts of money from other internet advertising forms. It certainly has the potential to do so. The scale's just not quite there yet."

Looking ahead to the second half of 2008, Mr. Swallen is cautiously optimistic about the combined $4 billion the Olympics and election spending are expected to add to the media marketplace, particularly TV.

"The Olympics are potentially an incremental $1 billion, which is nothing to sneeze at, but it just benefits NBC," Mr. Swallen said. Similarly, on the election side, it seems spending will be very healthy, totaling as much as $3 billion throughout the entire season. "That obviously will again be fairly concentrated spending disproportionately on TV," he said. "It's not a case of a rising tide that lifts all boats. It's a very selective tide that hits certain parts of the wave."
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