There's a third and perhaps more critical R-word to be considered: reality.
One year ago, Ad Age reported a recession was imminent ("Dark Clouds," AA, March 5, 2001). The recession formally began that month. The economy today looks to be in recovery, yet the ad market still appears unlikely to rebound till at least the third or fourth quarter.
"There's some anecdotal information in the market that says it's better than expected, but there's no real, hard evidence," said Jack Myers, editor of media industry newsletter the Jack Myers Report. He maintains an ad recovery won't occur until 2003.
Lauren Rich Fine, first VP at Merrill Lynch Merrill Lynch & Co., said agencies have indicated that clients' optimism, not budgets, have increased. "The mood of the client has really improved this year, but they aren't really increasing money yet," said Ms. Fine, who maintains earlier forecasts of 1.5% and 2.1% declines in 2002 U.S. and global ad spending, respectively.
An upturn in the overall economy seems more plausible. Federal Reserve Chairman Alan Greenspan, in a rare revision of his address to Congress two weeks ago, told a Senate committee March 7 that economic expansion was well under way.
That could bode well for advertising sometime later this year. "The upturn in the general economy is very real," said Giles Keating, chief economist at Credit Suisse First Boston. "Against this background, there's a reasonable chance that advertising starts to recover well ahead of 2003."
While advertising historically lags rebounds in the economy by three to nine months, experts think this ad market will recover relatively quickly once the economy gets rolling. Robert Coen, senior VP-director of forecasting at Interpublic Group of Cos.' Universal McCann, said the 2001 recession was much shallower than in 1990-91, leading to a shorter ad market lag. Ms. Fine, encouraged by General Motor Corp.'s plans to boost production, said continued positive news from the auto sector could speed the ad turnaround.
Recovering from the worst year-on-year ad decline since 1933 hardly means boom time. Since year-on-year comparisons began to ease up in January, it's easier to outperform 2001. "If you have a lousy enough year, it's not too hard to say you're going to look pretty good in comparison," said Mr. Coen, who expects 2002 U.S. ad spending to rise 2.4%.
Media conglomerates have noted hopeful signs. News Corp. last week said advertising is up 4% to 5% so far this year, but the owner of the Fox TV network and cable networks acknowledged it faces an easy comparison vs. the 10% decline in the same period last year. Scatter TV prices are rising (see related story, above). Clear Channel Communications reported a radio ad upturn of 1% to 3% in the first quarter, earlier than expected.
But magazine ad pages are still shrinking. Monthlies suffered a 12.4% drop this quarter, according to Media Industry News' report of 163 magazines (see related story, P. 17). With titles folding (Talk, Teen and New Choices closed in recent weeks), there's little evidence of turnaround.
"I read stuff about signs of an ad recovery," said a publisher at a leading title who requested anonymity. "I don't see it. But business is getting better." While the magazine expects double-digit ad-page drops in the first two quarters of the year, it's counting on lesser declines in the second quarter than the first.
contributing: jon fine