How Media Would Weather Recession

Buyers and Sellers Say Marketers Likely to Rely on Mobile, E-mail, Search

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NEW YORK (AdAge.com) -- With recession talk in the air, marketers are scrutinizing their spending. But old, reliable tricks such as counting on coupons to goose sales might not work this time around. Luckily, cheaper options abound in emerging media such as mobile, e-mail and search.
Below, Ad Age spoke with those in the trenches of the buying and selling of media about what they expect marketers to do as consumers tighten their belts.

Network TV
In years past, it would have been unthinkable to suggest that spending on network TV would be anything but healthy. But the medium is at an inflection point, with prime-time ratings steadily eroding and the recently ended writers strike keeping scripted comedies and dramas off the air. Analysts and media buyers expect a choppy period ahead and suggest the growth of network-TV ad spending, even as networks seek to put in place cost increases for ad time.

To date, the networks have been able to stay on track. "People are paying the market and are going to keep on paying in the near term," said Michael Nathanson, media analyst at Sanford C. Bernstein. That's because ratings shortfalls mean advertisers have to buy more time -- known as "scatter" -- to reach the same amount of people. "The question is: Can the ratings weakness be offset by the tough scatter? So far it has."

But clouds are hanging over the retail and automotive sectors -- two big supporters of the medium. While spending on network TV will grow, that growth could slow noticeably, said Bruce Goerlich, exec VP-director of strategic resources at Publicis Groupe's ZenithOptimedia. The firm sees overall "down" spending in the automotive, telecommunications, financial-services and personal-computer categories, while consumer package goods and pharmaceutical advertisers could spend more in the months ahead.

The recent writers strike has made media buyers and planners reconsider their commitments to network TV. Cable has started to gain share in prime-time ratings, said Mr. Nathanson, while Charlie Rutman, CEO of Havas' MPG North America, noted that "media like digital, outdoor and cinema are getting a seat at the adult table, as is mobile, in the last 18 to 24 months and going forward." Media buyers said syndication also is gaining more notice from advertisers. Sarah Fay, CEO of Aegis's Carat, said when there is a recession, marketers often feel the pressure to work with efficient forms of TV buying, so they are "really starting to look hard at the Long Tail of TV or having cable play a bigger role."

Cable
Cable TV already has seen an increase in ad spending and ratings as a result of the writers strike. It could see an even larger share of dollars pour in as the broadcast market tightens and the playing field for smaller, targeted networks becomes wider. "People definitely still want to be in national TV and may play around with their broadcast and cable mix so they can drive their CPMs down," said Steve Kalb, senior VP-director of broadcast at Interpublic Group of Cos.' Mullen. While cable is a cheaper alternative to broadcast, marketers are just as apt to turn to digital marketing to have the same targeted conversation with consumers. Jon Stimmel, director-media buying for Unilever, is one major marketer turning to other tools to supplement his TV buys this time around.

Digital
Digital, said Bryan Wiener, CEO of digital agency 360i, is the least vulnerable media spend in times of economic downturn because it is inherently more measurable than other media. "Digital, in general, does not feel the effects initially because in tough economic times, there is a flight to measurable media," he said, adding that the categories that tend to drive the best return on investment are e-mail and search -- so marketers are likely to continue investing in those categories regardless of the economy.

Search marketing, because it's so closely tied to sales, more often is thought of as a cost of goods sold rather than a marketing and administration expense. Therefore, it is assumed to be the most recession-proof of all marketing channels. David Kidder, CEO of search-technology firm Clickable, calls search "a unique insight into a consumer's wallet."

But don't forget that its success is tied to people's ability to purchase products and services. "E-retailers have been successful in search marketing because they can capture a specific moment of intent and convert it into real dollars," he said. "If the people who are searching aren't spending money, the value of that moment of intent goes down. The effectiveness of search marketing is tied to the economic value of the searchers."
Charlie Rutman, CEO of Havas' MPG North America
Charlie Rutman, CEO of Havas' MPG North America

Carat's Ms. Fay notes that economic strife may give marketers the license to experiment with new forms of media -- such as mobile -- because it doesn't cost that much to add to their marketing mix. "There are elements you can add to a media buy where it is not a huge media investment, but it has the potential to really increase the involvement of the community," she said.

Radio
When it comes to driving business locally, marketers are seriously considering radio. Laurie M. Clark, regional VP, Coca-Cola, Atlanta, has found radio effective when she'd rather not spend a big budget nationally, an approach used for the launch of Coke Zero. As recently as five years ago, the majority of Coke's media buys were executed on TV and radio. Now those are used to more efficiently drive reach and support plans that use more in-store media and other new platforms.

Rex Conklin, media director of Wal-Mart Stores, said Wal-Mart already has started using radio for more efficient media spending in the wake of economic recession. "Particularly in a down economy, the advantages of radio are significant in that it's very local and very flexible, which is incredibly important, especially when you're talking about pricing." "

Magazines
Consumer magazines' fortunes are at the mercy of the marketer categories on which they rely. "If we see the consumer-buying behavior changes to spend less, ultimately that could reflect changes in our advertising budgets," said Robin Steinberg, senior VP-director of print investment and activation at MediaVest. "But there are many cases when advertisers continue to spend regardless to keep awareness and top of mind for when it ends. ... Unfortunately when budgets get cut they seem to cut print first."

One hope for magazine publishers: web sites that can attract ad revenue even in tough times, partly because of low rates and partly because digital remains sexy to advertisers. "You have to look at it as a brand," Ms. Steinberg said. "What may fall out in one area, they may gain in another."

Newspapers
Newspapers face some pretty grim business trends, but the outlook will darken further in recession. "It will cut both ways," said Jason Klein, president-CEO of the Newspaper National Network, a partnership of 24 newspaper companies that helps marketers place national buys. "It clearly is bad news for classified, which is not a good story in any economy for newspapers." Help-wanted and real-estate listings in particular, which are already bruising papers by migrating to the web, will become scarcer in an economic downturn.
Bryan Wiener, CEO of digital agency 360i
Bryan Wiener, CEO of digital agency 360i

"On the other hand," Mr. Klein added, "for certain categories that need to promote sales in the short term, some of the retail categories may be picking up spending." Soft TV ratings lingering from the writers strike may even collude with retailers' more pressing need to push up newspaper ad sales a bit, he said. But media buyers aren't that optimistic. "I don't know, necessarily, if someone's budget is cut, that their choice will be to go to newspaper, because newspaper is very expensive to buy," said Paula Hambrick, president of Hambrick & Associates, a media-buying service. "When you start looking at how many people you're reaching and how much it's costing, it's an expensive medium to use."

Out-of-home
Out-of-home -- thanks to new digital and video technologies -- has started to take a larger percentage of media budgets, beyond just a portion of what marketers set aside for nontraditional media. However, the potential economic downturn could leave the fate of some of those budgets in limbo. "I hope this recession doesn't cause clients to exercise cancellation clauses," said Jack Sullivan, senior VP-out-of-home-media director for Starcom.

In-store, coupons, circulars
Coupons and in-store marketing traditionally thrive in downturns, but it's not clear that will be true this time around. So-called shopper marketing already was booming, with Deloitte Consulting and the Grocery Manufacturers of Association projecting growth of 20% or more this year, but the downturn may not bring any extra boost.

Coupon distribution has grown steadily since the last recession ended in 2002, notes Charles Brown, VP-marketing for NCH Marketing Services, a coupon clearinghouse owned by Valassis Communications, one of the two leading distributors of newspaper freestanding coupon inserts. But while distribution has steadily risen, redemption has fallen in recent years, as marketers have moved to shorter expiration periods and looked to use coupons more as advertising than promotion. While both coupon distribution and redemption rates rose in the recession of the early 1990s, they rose less so in the last recession in 2001 and 2002, he said.
Robin Steinberg, senior VP-director of print investment and activation at MediaVest
Robin Steinberg, senior VP-director of print investment and activation at MediaVest

Despite recent projections by industry executives that they'll spend more on advertising in the months ahead, Sunil Garga, global president-business and consumer insights for Information Resources Inc., says he's already hearing of plans by major package-goods marketers to cut, or at least tighten, media budgets. Nevertheless, he expects shopper and online marketing to see continued strong double-digit growth for package-goods players despite, or even because of, recession, because they're more accountable than other media and better at conveying promotional messages.

"As consumers get more frugal, CPGs will shift their media to things that have a more immediate return on investment," Mr. Garga said. "Shopper marketing is a captive audience in the store with an immediate effect. ... Online is a medium, too, that supports more value-oriented messages."

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Reported by Andrew Hampp, Nat Ives, Abbey Klaassen, Megan McIlroy, Jack Neff, Brian Steinberg
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