According to data from TNS Media Intelligence, U.S. ad spending grew a paltry 0.2% to $149 billion last year. The study, which measures ad spending in categories including TV, magazines, newspaper and radio, also shows a 0.1% drop in spending in the fourth quarter of 2007 compared with the year prior. It's enough to make you want to dump your media and holding-company stocks before it's too late.
But the numbers belie some undeniable bright spots in the industry. For starters, the four major advertising holding companies all reported revenue growth in 2007, with Omnicom up 12%, WPP up 8%, Publicis up 7% and IPG up 6% -- and that's with a soft economy and limited acquisitions.
What gives? Firstly, holding companies are gaining larger amounts of their revenue from digital investments. What's more, marketing services such as direct marketing, public relations and search are growing at rapid clips. A brief look at the numbers for those industries shows largely positive news. In 2007, spending on direct marketing was up 4.4%, according to the Direct Marketing Association; spending on search grew nearly 27%, according to eMarketer; and PR agencies reported an average growth of 12.3%, according to the Council of Public Relations Firms.
"Marketers are increasingly inclined to use multiple tools," said Richard Edelman, CEO of public relations firm Edelman. "It used to be that advertising was pretty much the centerpiece of most marketing campaigns. Now, oftentimes, marketers will open with PR, and in a way PR creates the runway of credibility that allows the advertising to work more effectively."
Greg Smith, CEO of digital and direct-marketing agency Neo@Ogilvy, says marketers have become much more receptive to marketing services in recent years because they are "disillusioned with the status quo. Procurement people are getting more involved and they are looking at things like TV pricing increasing. Marketing people are getting younger ... and they are much more comfortable with breaking the mold."
In fact, another study released last week painted a positively different picture of the marketing business than TNS did. According to PQ Media's Alternative Media Forecast, total marketing spending on alternative media, including digital and nontraditional segments, climbed an impressive 22% in 2007.
According to PQ Media, the marketing-services sector represents more than half of all spending by brand marketers today.
"Brand marketers, media companies and financial institutions are demanding new research methodologies and measurement systems because ... old media metrics won't work in a new media order," Patrick Quinn, president/CEO of PQ Media wrote in a recent column for MediaPost.
But Jon Swallen, senior VP-research at TNS, says breaking out traditional mass media is still an important yardstick for the health of the sector.
"The ad spend is a very large subset," he said. "It's useful because it provides a scorecard for traditional mass media, mass-marketing type of outlets that have been the bread and butter of the marketing industry for a number of years."