"Nobody's going to be fired for spending on Facebook."
Thus a digital-media executive summed up the sentiment on Madison Avenue as advertisers from American Express to Zappos are trying to stretch every marketing dollar. The theory is that wary financial investors will applaud spending on social media because of its lower cost and growing reach. So it follows that the ad dollars flowing to social media are buoying the ad economy at large, right?
Magna Global's estimate for ad spending in the first quarter is print down about 5.6%, radio down 0.3%, outdoor up 5% and TV up 4.5%. For the full year, Interpublic Group's Magna has predicted rises of 6.8% for TV ad spending, including political and Olympics spending, but 2.4% excluding them; 11% for web; 0.8% for radio; and 4% for outdoor. It forecasts declines of 6% for newspapers and 5.9% for magazines.
Continued fragmentation and the rise of social mean individual traditional-media sellers may not experience the projected rebound even if marketers are spending more on the whole. And positive economic headlines don't encourage increased ad spending as much as all media sellers would like.
"I don't think we've truly experienced recovery," said one print buyer, who added that most ad budgets are flat. "When consumers spend, then marketers will have more money to put back into marketing."
The first part of 2012 should spell the end of a lengthy slowdown that has crimped ad spending, according to Vincent Letang, Magna's global head of forecasting. "It will pick up a little bit in the third and fourth quarters, and a lot more if you factor in political and Olympics money," he said.
TV ad spending fell in the fourth quarter of 2011 but began to climb and stabilize in first-quarter 2012, though General Motors told networks it would cancel some portion of its agreed-upon upfront outlay for second-quarter ad spending on broadcast and cable. Even so, ad-sales executives at TV networks say they are seeing healthy prices for so-called scatter advertising that is purchased closer to air date.
Fortunes naturally flow to the strongest in the sector. Ratings at the top 10 cable networks were weak on average in the first quarter, while smaller channels appear to be gaining, according to RBC analyst David Bank. TBS and History show some strength, but most other top-tier cablers are weak, he said.
News Corp.'s FX, for example, has ended its phenomenal five-year run as insurgent networks such as AMC are growing. Even relative unknowns such as GMC (Gospel Music Channel) are getting some lift.
Ratings drops often mean networks must give advertisers make-goods. The tightened supply can lead to higher cost per thousands but also lowers overall revenue.
Some of 2011's TV growth simply is nowhere to be found this year. The abnormal percentage gains were fueled partly by marketers' loosening their purse-strings to compete for consumers trying to shake off the recession. And many advertisers used some of the funds typically budgeted for scatter buys to lock down lower prices during upfront talks.