Budgets Flatline in First Quarter

Ad Spending Grows Just 0.6%

By Published on .

NEW YORK (AdAge.com) -- U.S. ad spending grew an anemic 0.6% in the first three months of the year, as a slow economy countered media companies' earlier, brighter hopes for 2008.

Bright spots exist -- such as Spanish-language media and prodigious spenders such as PepsiCo -- but even the country's 10 biggest advertisers, half of which boosted ad spending by striking degrees, couldn't combine for more than $4.4 billion, a 1.6% increase. Spending on the top 10 advertising categories, meanwhile, actually fell 1.8%. Even internet display ads, which have been posting the biggest growth rates, tapered off to a tepid, single-digit 8.5%.

"All of us are eating off of the plate that's been provided to us by consumers," said Jon Swallen, senior VP-research at TNS Media Intelligence, whose report on the first quarter provided those dreary numbers. "When consumer spending begins to dry up or slow down, it does ripple through and eventually comes back and impact marketers -- and eventually ... begins to impact the volume of marketing activity."

Marketers were leaving a lot of ground fallow even before the conventional wisdom decided the U.S. economy was acting recessionary: Every quarter last year turned up little or no growth. But now marketers are worrying about rising food and gas prices, a depressed housing market, tighter credit and growing unemployment.

But those aren't the only dynamics pushing marketing money around. Many of the big package-goods conglomerates, including Unilever and ad-spend champ Procter & Gamble, are actually increasing their outlays amid all-new competition for consumers and shelf space. Advertising more may also help prevent price-conscious shoppers from trading down to cheaper brands.

Energy crisis
For other reasons entirely, PepsiCo pumped its spending up a whopping 39.5% to $334.4 million. That's the same PepsiCo whose CEO, Indra Nooyi, told a June 11 conference in New York the government wasn't doing enough to counter soaring energy prices. "I don't see anybody in Washington or anywhere saying 'Look, this energy crisis is the biggest one we've had, let's really put the best people to work on figuring out how to reduce the country's dependence on oil,'" she said.

But PepsiCo also had a new product to introduce in G2, a low-calorie Gatorade spin-off, said Gary Hemphill, managing director-chief operating officer at the Beverage Marketing Association. "The Gatorade trademark is important to Pepsi and experienced softer-than-usual sales in 2007," he said. "The company is certainly committed to growing that trademark and that's probably why you see the increases in expenditures."

Media sellers' side of the equation was no less complicated. Online display advertising grew 8.5% in the first quarter, far slower than the usual 15%. But the deceleration says more about the financial services companies, whose ads had underwritten much of that double-digit growth, than it says about the web, Mr. Swallen said.

Spanish-language media fared notably well, up 4.4% for TV and up 14.2% for magazines. Some of the growth can be attributed to the recent, if belated, arrival of good research on Spanish-speaking consumers, said Jacqueline Hernández, chief operating officer at Telemundo Communications and former publisher of People en Español. "It's getting more tools to measure how Spanish language is really effective," Ms. Hernandez said. "And then also looking at the demographic changes and quite frankly the impact that Spanish language is having on pop culture. I mean, when Beyoncé is singing in Spanish, it makes logical sense for this area to grow and for it to continue to grow."

The overall story is not so happy, but you can make out the plot pretty well, said Mr. Swallen. "And recognize at the same time that this is cyclical," he said. "This is the current act of the play and there more acts to come. Some of those acts in the future will be happier."
Source: TNS Media Intelligence
In this article:
Most Popular