The year was a pleasant surprise for most sectors of the ad industry, and gives every indication that the future looks good for advertising in the U.S.
At the beginning of '97, the expectations were for moderating economic growth and little further expansion in ad budgets, compared with the extra high levels spent on advertising in 1996.
The preceding year held both a presidential election and a Summer Olympics in the U.S. So years like 1997 -- odd-numbered, post-Olympics years -- are characterized by many media as "hammock" years, which regularly experience a sag in ad revenues relative to the preceding high levels.
TV NETS DIP SLIGHTLY
Still, the major broadcast TV networks experienced a slight drop-off in ad revenue, 0.5%. This was to be expected following the spending burst for the Atlanta Summer Olympic Games.
In 1985, the last prior year following a U.S.-based Summer Olympics (in Los Angeles), the TV networks suffered a 3.1% sag in ad revenues. The falloff last year was less severe, despite a lot more direct competition from cable TV and other broadcast TV alternatives, plus continued audience-level slippage.
All things considered, the TV networks did better than should have been expected in '97.
Most media, even the ones that did not do too well, ended the year with much better results than expected when the year began.
Increases in ad spending on the cable TV networks were in the high double digits, and newspapers and radio also posted exceptionally strong gains.
AD SPENDING UP 7% OR MORE
Generally speaking, advertising expenditures by both national and local marketers were up 7% or more in a year when nominal gross domestic product continued to expand at a relatively good 5.8% pace.
In 1997, advertising grew considerably faster than the economy, a trend that has been in place since the ad recovery began to get under way late in 1993 -- about two years after the economy itself began to recover. The year's results show advertising is on a strong upward trend, which will continue even if there is some slowdown in the economy.
By the time all four quarters of 1998 are completed, there may be signs the economic expansion is slowing and that probably will have little effect on advertising trends.
The good business climate and high consumer confidence persisted throughout the opening quarter of '98. The Winter Olympics and reasonably strong ad demand assured continuation of the spending momentum that accelerated in the closing months of '97.
On the local level, strong growth in ad revenues for most media appears likely again.
Contractions in retail outlets have ended, and new stores and growing competition for store traffic are picking up in many markets. And local marketers -- particularly local retailers -- have a long way to go in raising their promotional activities before risking the excesses of a decade ago.
Ad expansion in the third and fourth quarters of 1998 will be further fueled by political activity, as all members of the House of Representatives and a third of the U.S. Senate are up for re-election.
There also will be other election contests that should add to the swelling demand for ad time and space in the second half.
With the outlook for ad growth so positive, it should again outpace economic growth. U.S. advertising revenues should reach or pass the $200 billion level in 1998.
It's now apparent that advertising's role in marketing will be considerably more important in the 21st century than it had been in the closing decades of the 20th century.
In the not-too-distant past, the advertising industry underwent a harrowing slide. It suffered partly because product marketers and retailers over-expanded their use of advertising in unrealistic efforts to build sales and profits. Then they trimmed budgets drastically while switching to pricing tactics, in last-minute efforts to put off facing the inevitable consequences of these excesses.
It would be an oversimplification to blame that on the users of advertising and ignore the fact that the media and ad agencies did little to discourage excesses. In fact, as excess ad demand built up, media usually raised their rates, and other practitioners continued to recommend bigger spending in an attempt to unrealistically solve the slow-growth problem.
The inevitable corrections set in during the closing years of the '80s. The bottom was reached in the opening years of the '90s. But after a period of pain and suffering, the industry has finally recovered to a healthy state with much better prospects for the future.