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Call us contrary, but there's an upside in the stock market's recent tumbles. If it prods top managements at marketers, agencies and media companies to pay more attention to the fundamentals of their businesses, and less to how sky-high stock values make them masters of the mergers & acquisitions universe, they and their clients will be better prepared for the rigors that come whenever a leaner economy arrives.

It was no surprise, after the market rebounded last Tuesday, that many ad industry people were happy to set aside bear market talk and to suggest all will stay well in the consuming world. The first half of 1998, as we noted here earlier, was surprisingly strong for the U.S. ad business, and forecasters such as McCann-Erickson Worldwide's Bob Coen predicted the full year could nearly replicate 1997's 7% gain in ad spending.

But there's enough uncertainty to give us pause. Asia. Russia. Terrorist strikes. A presidency mired in crisis. Deflation worries. Troubling indicators in the technology industries, a driving force in the economy and the driving force in the stock market. Technology media company CMP Media, forecasting drastically lower third-quarter profits, cited advertising and marketing cutbacks due to a "widespread slowdown in sales-growth rates."

Economists say there is no automatic correlation between ups and downs of the market and the economy. Maybe. But the stock market, and especially overheated Internet stocks, seems predicated on a belief that the world is different now, that cautious old ways of measuring stock values are outdated, that business downturns are passe because our economic engine is just too strong.

It's been a great ride, and many ad world top execs will miss those sky-high stock prices. But the marketing business, and the broader marketplace, will be better off for whatever lies ahead with a stock market at more realistic levels. Better to take some hot air out of the market now than to see the balloon pop.

Radio waves

The new and bigger Chancellor Media Corp., which will have 471 radio stations if Washington approves its merger with Capstar Broadcasting Corp., confronts advertisers and media buyers with a question that can no longer be avoided: Just how big are the new media giants going to become? And, with giant radio groups assembling multiple stations in the same market, will the not-so-hidden cost eventually be less competitive pricing for advertisers?

Chancellor's nearly 500 stations are just part of a national radio industry with more than 11,000 commercial AM and FM stations, of course, and the ad business itself is creating giant media-buying companies to maximize its bargaining power. But Chancellor is only one of several companies amassing large chains of radio stations, and the power they may gain in individual local radio ad markets is potentially worrisome. (Chancellor, for example, last week abandoned a bid to acquire a sixth and seventh radio station in Texarkana, Texas, after federal antitrust lawyers objected. Under that deal, Chancellor would have controlled about 62% of radio ad dollars in the market.)

The radio giants say their size generates economies of scale and other benefits for advertisers. But the Association of National Advertisers and all marketers that use radio need to carefully weigh the benefits against the possible costs that come when a handful of giants dominate key markets in this medium.

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