Merrill Lynch cuts spending, cites war

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Merrill Lynch & Co. is scaling back its advertising commitments starting this month as investors watch and wait for a resolution of the U.S. standoff with Iraq.

"We did some consumer research and [found] the investor marketplace is frozen. People-because of the geopolitical situation-are frozen," said Bob Horton, first VP-brand management at Merrill's Global Private Client unit.

Mr. Horton said the company will continue to support its "Total Merrill" campaign, which began running in January to promote its wealth management services. He wouldn't specify by how much spending had been reduced. Merrill spent $66.2 million in the first 11 months of last year, according to Taylor Nelson Sofres' CMR. The majority went toward print-$20.1 million on national newspapers, $12.7 million on local newspapers and $15.8 million on magazines. Only $5.2 million went toward national TV; $2.3 million went to spot TV and $6.5 million to cable.

The reduction in advertising "has been a pretty ecumenical cut," said Mr. Horton. The cutbacks are across the board, although some media may take longer to show, due to the varying lead times. For example, Merrill ads are already placed in April and May monthlies.

bad timing

"Research just told us it wasn't the time to be spending the money," said Mr. Horton. Merrill will decide whether to restore the ads based on the results of future surveys, he said.

Publishers said such concerns are not exclusive to financial advertisers. "I don't think it's limited to financial" marketers, said one. Fashion marketers, he added, "are not going to want to be in the middle of a war story."

In conference calls with analysts last week, agency-company CEOs noted the war anxiety is making advertisers wary of committing to new campaigns. (See stories, P. 10) American Express Co., for example, quietly began adding a "war contingency letter" to its media contracts. (AA, Jan. 13)

"Investors don't like uncertainty," said J. Walker Smith, president of market research firm Yankelovich. In a conference call with clients, he said the start of a war could move the stock markets up and that a quick U.S. victory could lift them further. But he warned that research doesn't support the notion that the economy will rebound after the war.

Consumers were anxious about the economy before war with Iraq became a possibility, said Mr. Smith. Weak stock markets, rising unemployment and corporate scandals plagued the U.S. consumer for the last two years, and their effects won't fast disappear. Increased corporate spending and more hiring are the two ingredients still missing for a recovery.

"War is a concern people have in addition to, not instead of, worry about the economy," he said. "A quick, decisive war is unlikely to be a turbo booster for the economy."

contributing: jon fine

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