Industry observers-who had seen advertisers this year cut marketing budgets quarterly to meet earnings goals-say the aftershocks of the attacks will be severe in the short term. But they contend the ad recovery will kick into high gear as measures such as the airline-bailout package before Congress go into effect.
That could be wishful thinking. Advertisers are under intense pressure to deliver profits to prop up depressed stocks after Sept. 11, and that puts pressure on ad spending. Viacom, the big TV, radio and outdoor-media company, last week issued an earnings warning, citing advertisers' "uncertainty."
"Some advertisers believe their current campaigns are inappropriate for today's business environment and consumer sentiment and are working to revise their messages," President-Chief Operating Officer Mel Karmazin said in a statement. "Most companies we spoke with believe they will return to normal advertising levels but are uncertain about the timing."
While advertising will be pulled and prodded, and some canceled outright, many agencies expect to be busy working to help redefine brand messages following the attacks. "Some people are concerned about having the appropriate creative on the air, and so they are re-evaluating their creative to see if it is appropriate," said Steve Grubbs, CEO of Omnicom Group's OMD USA. This re-evaluation will be an additional cost to advertisers and thus more revenue for agencies.
David Kessler, managing director of Interpublic Group of Cos.' Hill Holliday, New York, said he saw a short-term drop in spending, but he believes it will be over by October and that fourth-quarter spending actually could be greater than originally intended because clients had September money to spend. "I get the sense that clients want to get back to business pretty quickly," he said.
"We haven't seen many major changes except for the airline industry," said Jon Mandel, co-managing director of Grey Global Group's MediaCom. "Most advertisers are asking us to hold up until we redo things. It's a content thing; unfortunately some great tag lines are now pretty offensive."
Travel and airline spending has been slashed, most agency executives agree, but there is a difference of opinion as to whether other categories are cutting back. "There are no nontravel-related ad budget cuts because of the crisis," said a top media agency executive who requested anonymity. "Our stuff has only been postponed or suspended. We try not to use the word canceled."
However, a media-buying executive who wished to remain anonymous said nontravel-related advertisers are slashing budgets, even into next year. "I was working on contracts with these clients, and they said, `No, we can't go further because we are having cuts.' " This executive added that client's actions predated the disaster by a week.
Many agencies are moving client's ad budgets into alternative media.
"We are focusing our client's dollars on marketing tactics that trigger a response," said Marc Brownstein, president of the Brownstein Group, a Philadelphia shop that has many retail clients and which is moving some money into Web marketing and direct mail.
TV and radio advertising is flexible enough to postpone or shift plans, but print and outdoor advertising media are more rigid and as a result may be more vulnerable to cancellations. "Magazine and out-of-home advertising, which has longer production lead times, closing lead times, space closings and purchase lead times, could be hit much harder," said Charlie Rutman, president of Aegis Group's Carat USA. "In uncertain situations, the tendency is to not get too far ahead of yourself. I'm not saying advertisers will only be thinking short term, but the possibility of not getting too far ahead of yourself, where you can't cost correct in an instant, is there."
Contributing: Mercedes M. Cardona and Hillary Chura