Where to Find the Bright Spots in 2009

From Online Video to Pet Care and Analytics, There Are Opportunities

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NEW YORK (AdAge.com) -- The worst November-December retail season since 1970; taxpayer bailouts to save Detroit; marketing budgets slashed; tens of thousands laid off across agencies, media companies and marketing departments; and still more cuts coming every day.

You've read the bad news, and no one's denying that it's grim, but surely there are some bright spots out there somewhere? Ad Age decided to go digging for some areas that might provide opportunities for the marketing and media industries to not only survive, but even thrive in 2009. Here are a handful, and we'll be bringing you more throughout 2009.


In case you hadn't heard, there are some new faces in the nation's capital, and they will fuel growth for lobbying, public affairs and policy advertising in '09. Torod Neptune, senior VP-global public affairs at Waggener Edstrom, said his shop's Washington clients are all either maintaining or greatly increasing budgets. "The new Congress has made it pretty clear they are going to introduce sweeping legislation in the areas of health care, financial reform and regulation of energy," he said. "The work we're doing for clients focuses on ensuring they have the opportunity to engage with new congressional members and their committees on the Hill, and helping them develop third-party ally networks." Waggener Edstrom is actively recruiting talent for its D.C. offices. Michael Kehs, head of public affairs at WPP's Hill & Knowlton, is not only busy with the agency's existing clients, but said new business is also very active with RFPs coming from the manufacturing, health-care, energy and environmental sectors. "The whole economy is on the plate here in Washington and people are going to want their seat at the table."


Package-goods marketers still have relatively flush budgets, can benefit from falling media rates as whole industries such as automotive pull back, and are starting to see relief from once-soaring commodity costs. Even the threat to earnings of U.S. multinationals such as Procter & Gamble and Colgate-Palmolive also lessened when the dollar retreated a little in December. Despite trimming sales guidance for the current quarter, P&G didn't have to reduce earnings guidance. While P&G discovered it wasn't "recession-proof," it is recession- resistant. The question, though, is how fast it and competitors will have to cut prices next year as commodity costs fall.


Can we make money off the historic election of Barack Obama? Yes, we can. Both the Franklin Mint and the New England Mint have been soaking up a lot of excess TV inventory lately by selling commemorative coin sets for $19.95. Even the Obama campaign has continued to rake it in post-election. BarackObama.com is still selling, or, um, distributing, to contributors who want to commemorate his victory by obtaining T-shirts, coffee mugs, pins and refrigerator magnets. One sign the site is committed to direct response for the long haul: Buyers, or, rather, contributors, are even getting follow-up e-mails hawking new items developed after the election, such as a recently added four-year calendar (Where's the confidence? Why not eight?). Alexa data indicate the site was still getting more than 300,000 visitors daily last week.

These are salad days for direct-response advertisers of all sorts, as a growing glut of TV inventory has improved industry economics after the go-go years earlier in the decade drove some off the air. "It's a very good time to be in direct response," said serial DRTV advertiser Barb Carey, marketer of Hairagami and Spinlash and more than 100 other products. "But we also have the marketers of the Obama coins and stamps buying up all the media time, too, so it's a competitive world," he said.


Spirits and wine sales have slowed, with Constellation Brands, which markets Robert Mondavi and Svedka, seeing sales dip 6% in the fourth quarter. And there's little doubt where they've gone: to the beer aisle, particularly the bottom shelf. Budget beer brands saw sales climb about 8% in December. Big gainers included Keystone and Pabst Blue Ribbon. Analysts say they expect the trend to continue as consumers trade down from pricier beverages and go out less. "We expect this [trading up] to start reversing, driving beer's share loss to spirits/wine to moderate, if not reverse," Goldman Sachs observed in a report predicting a $325 billion decrease in consumer spending this year, largely at the expense of luxury brands. Domestic beer, in Goldman's parlance, contains a multitude of "desperational gainers" -- in English: brands that figure to benefit from the behavioral shift.


In the U.S., online video will continue to rise dramatically relative to other online advertising channels in the next few years, dwarfing growth in search, display ads and rich media. According to recent data from Mediamark Research & Intelligence, the number of U.S. consumers 18-plus who watched online videos in 2008 increased 35.5% from 2007, representing more than 23% of the study's adult population. And research firm Emarketer estimates that online-video advertising will increase 44.9% to $850 million in 2009, a growth rate that promises to stay strong through 2013, when the market is expected to be $4.6 billion. Premium-content sites such as Hulu, ESPN.com and ABC.com likely will benefit the most, as more Americans turn to PCs instead of TVs.

Mike Vorhaus, president of Magid Advisors, said long-form, professional-quality online-video content is particularly promising because it's what ad agencies, media agencies and media companies already know. "For the most part, you're selling to TV buyers TV ads in TV content. -- only it's online." The audience for it continues to grow too. A Diffusion Group study projects that by 2013, long-form video will represent almost 70% of online-video ad revenue, up from just over 40% today. 


Hispanics account for about 50% of the population growth in the U.S., and the Pew Research Center forecasts that Hispanics will make up 29% of the U.S. population in 2050, up from 14% in 2005. For many marketers, Hispanics are their growth segment. That's why Walmart, a major marketer to Latinos, is pressuring its suppliers, such as GE, to develop their own Hispanic-marketing strategies. Johnson & Johnson says it will spend more on Hispanic marketing in 2009, adding brands that have never advertised to that segment before. And whole categories, such as pharmaceutical, are assigning brands to Hispanic agencies for the first time. Even hard-hit sectors such as magazines can succeed in a tough economy if they target the fastest-growing Hispanic segments. Meredith's Spanish-language magazine for new parents, Ser Padres, enjoyed meteoric growth in 2008, with ad dollars up 122.6% through September 2008, according to Publishers Information Bureau figures.


Amazon's Kindle was hot this Christmas, even at a cool $359, which makes it more expensive than either a Wii or Xbox. The wireless reading device was Amazon's best-selling item in the electronics category in 2008. And a week into 2009, it was still sold out and not expected to ship for seven to nine weeks. "Due to heavy customer demand, Kindle is sold out," Amazon's website states. "Please order Kindle now to reserve your place in line." The device has been hailed as the iPod of the book business by CitiGroup analyst Mark Mahaney. He predicts Kindle will generate $750 million dollars for Amazon in 2010, representing nearly 3% of the retailer's revenue. Bob Miller, president-publisher at HarperStudio, said, "It's the source of a lot of optimism in our business."


If ever there was a business built to be counter-cyclical, it was crisis PR. Gene Grabowski, senior VP of Levick Strategic Communications, said crisis has been good for business, and that 85% of the agency's workload is made up of financial, litigation, issues-management and crisis work. The financial assignments involve managing bankruptcies and messaging for companies that have gone under. While the PR industry still employs more people in media relations than in crisis management, bigger shops will benefit from the strength of their crisis and public-affairs departments, and perhaps from a few smaller-budget marketers ditching traditional advertising in favor of an often-cheaper marketing option. U.S. PR-agency employment in June 2008 reached its highest point (52,300 jobs) since the 2001 recession. Recent data show it did slip in November -- to 51,200 from 52,200 in October -- but employment is still up since the recession began in December 2007 (when agencies employed 49,900), all per the Bureau of Labor Statistics.


While we're talking BLS stats, here are two other bright spots: cable TV and marketing consulting. Cable employment in November reached a record high of 96,900 jobs, according to the data. Cable networks are doing comparatively well in a slumping ad market. Magna Global's Robert J. Coen expects national ad spending on cable TV to edge up 1% this year vs. a 7.5% drop for broadcast networks. Marketing-consulting employment hit a record 153,000 jobs in October. As marketers slash payrolls, companies have brought in the consultants on a project basis to chart a way out of this mess. Bear in mind, however, consulting gigs are no sure bet in a tough economy; consultancies cut 2,800 jobs in November.


Digital out of home is entering 2009 already in a position of growth, finishing 2008 with $2.43 billion in ad dollars, an 11% increase from 2007. Patrick Quinn, CEO of media-forecasting firm PQ Media, estimates that digital out of home will continue to grow 9% in 2009, even as traditional outdoor declines 1%, and cites the increased ease of measuring consumer activity away from the living room as a point of appeal to advertisers and investors. "The secular trends driving growth in the out-of-home space aren't going away. People are spending more time outside the home and commuting more, the youth market continuing to multitask and spending more time outside the home," Mr. Quinn said.


Mobile will continue to be a growth area, and vendors remain bullish. More advertisers are expected to dip their toes this year, while others will plow ahead in their experimentation. Location-based advertising (Loopt in partnership with CBS will launch its advertising platform this year), in-game mobile advertising and mobile-video services are examples of emerging areas. The caveat is that mobile remains a tiny piece of the overall pie, and the absence of proof points is not helping. According to estimates, mobile marketing will grow from $708 million in overall revenue this year to $2.2 billion in 2012 -- a compound annual growth rate of 26%.


Fido is recession proof, judging by a 17.1% increase in fourth-quarter sales of dry dog food, according to Information Resources Inc. data from Deutsche Bank. Sure, it was all about commodity-fueled price hikes, as volume actually declined slightly -- 0.3%. But at least people kept buying kibble rather than moving to table scraps and putting the pup up for adoption (or worse: P&G Chairman-CEO A.G. Lafley once noted the impediment to expanding Iams to developing markets was that dogs are sometimes considered food, not served food). Research released by Unilever earlier this year on "Winning Shoppers in Turbulent Times" found that fewer than 6% of U.S. shoppers said they would stop or decrease buying pet food as the economy worsens, and the IRI data indicate that even those folks didn't follow through. A far larger portion -- nearly half -- said they'd stop buying cookies or buy them only on sale. More evidence that pets may fare well as the economy goes south: PetSmart beat most retailers in the U.S. in November with a 5% increase in same-store sales.


The marketing industry's growing love affair with data and analytics is as passionate as ever, and the recession will doubtless drive more brand managers into the arms of the data wonks. Speaking to analysts in November, Nielsen CEO David Calhoun said he still can't hire enough analysts to keep up with demand, which is increasing, thanks to the economy. "There is a lot of attention being paid to market-share shifts, pricing analytics, the kinds of things that can sort of keep everybody's heads above water during this tumultuous time," he said.


While every broadcast network is losing viewers, CBS is losing fewer of them. When the time comes in May for marketers to decide which TV outlets deserve their ad dollars, CBS could be in a stronger position than rivals, particularly as its crime dramas maintain and in some cases grow their audiences. (NBC's decision to put Jay Leno in a five-days-a-week talk show at 10 p.m. next season augurs well for CBS's dramas in late prime-time.) CBS's household ratings were off only 1% on a live-plus-same-day basis as of Jan. 7, according to Wachovia Capital Markets; Fox and ABC are off 12%, NBC 11% and the CW 23%. Meanwhile, CBS boasts the only real new hit of the fall season, "The Mentalist." Ratings erosion is nothing to shrug off, but many advertisers still need mass audiences, and they are likely to consider outlets that can deliver, even if the overall market is shrinking.


This recession will bring in new form of sustainability: luxury recycling. Take the firm Cash4Gold, which, um, will pay you cash for your gold chains, watches, rings and even dental fillings. As you may have seen on its DRTV spots now bombarding cable networks, the price of gold -- as well as silver and platinum -- is at an all-time high, leading many cash-strapped consumers to reach into their jewelry boxes for busted-up chains and old timepieces. According to Inc., Cash4Gold is the 271st-fastest-growing company in the U.S. But more important, it stands as an example of how to fill a hole in the market created by holes in the market. Its lesson is simple: Identify some commodity or product that was popular in the go-go days, and find a cost-efficient way to repurpose it. Pennies4PrivateJets, anyone?


China is still a bright spot for multinationals. The Chinese government is pushing through a massive $582 billion stimulus package, and China's GDP is expected to grow 8.5% in 2009. That's slower than it has been -- it was above 10% until 2008 -- but, well, no one's sniffing at high-single-digit growth predictions either. For basic stuff such as household goods and food, sales are holding steady, and marketing budgets for some companies (such as PepsiCo) are actually increasing in China. Even car sales haven't nosedived completely like they have in Western markets. Some agencies ( TBWA, JWT, Ogilvy) have laid off some staff in Hong Kong, but in China no one so far is laying off staff.


Cheap food is about as recession-proof as it gets, because, you know, we all have mouths and stomachs. General Mills posted double-digit sales gains in many of its core businesses last month, and credited its 21% increase in marketing support with much of that success. With the cash crunch ongoing, more and more consumers are expected to trade from restaurant to grocery store.

But since some folks can't be talked into cooking no matter how tight money gets, fast feeders with strong value messages are cashing in. McDonald's posted a 5% gain in U.S. same-store sales during November, Subway posted double-digit same-store sales throughout 2008, and Domino's reported same-store sales up 9% in December as more consumers decided to eat in. Darren Tristano, exec VP of Technomic, said that fast-casual concepts such as Chipotle, Qdoba and Five Guys Burgers and Fries also stand to gain in the coming year, as families trade down from Applebee's, Chili's and Cheesecake Factory. "They're hitting the sweet spot in between limited and full-service with a better-quality product, convenience and a low price point."


According to ComScore, coupon sites were the fastest-growing online category in November by traffic, up 32% from October to 35.6 million. Coupons.com got about a quarter of that, or 8.5 million visitors, up from 8 million in October and 6.5 million a year ago. The company has seen its redemption rates increase 1% to 17% in the last year. (A newspaper coupon's average redemption rate hovers around 1%.) As a result of the economy, Coupons' chief executive Steven Boal said his business has been growing 20% to 25% every month. His staff has also doubled in the past year to 135 people -- and he has 40 positions to fill by the end of February. Mr. Boal said clients such as General Mills, Johnson & Johnson, Kraft, Safeway and Clorox are committing to more online couponing as newspaper circulation continues to decline, and some local papers are folding. "Over the past three years, we've seen major marketers shifting from newspaper to web, but it's becoming a lot more aggressive."


Smith & Wesson's shares are up 82% since October, a run fueled by fears of President-elect Barack Obama's gun-control views.

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