Spending in Midst of 3-Year Drop, First Since Depression

Advertising Is Slumping in Key Categories Including Retail, Auto and Telecom

Published on .

More AdAge Annual Coverage:
Introduction | Stocks | Marketers | Media | Agencies | Jobs

The recession officially began in December 2007. But Magna's Bob Coen calculates that U.S. ad spending actually fell in full-year 2007, with bigger drops seen in 2008 and expected in 2009. That would be the first three-year decline since the Great Depression.

Those negatives add up: U.S. spending in 2009 likely will slump to its lowest point since 2003. Factor in inflation, and '09 spending likely will come in well below the level of 2001.

On a measured-media basis, U.S. ad spending turned south in March 2008, declining 1.7% vs. a year earlier, according to Jon Swallen, senior VP of WPP's TNS Media Intelligence. Measured spending fell 3.7% in the second quarter and 2.0% in the third quarter, despite the windfall of Summer Olympics and political campaigns.

Need more depth?
You'll find more data and links at AdAge.com/annual09

Ad spending drops are unusual. Prior to this down cycle, U.S. spending declined in only three years since the end of World War II, according to Mr. Coen's data: the recession years of 1961, 1991 and 2001.

Nominal ad spending growth was pretty weak in the last up cycle (except for a strong 7.4% jump in 2004). To be sure, inflation also was low, limiting the ability of media companies to pass on higher rates.

A look at leading ad categories shows why advertising is faltering. The top two categories -- retail and auto -- have been slammed by a pullback in consumer spending. Telecom measured ad spending, meanwhile, fell 5.2% in the first nine months of 2008, according to TNS. Financial? Measured spending rose slightly in the first nine months -- but the financial meltdown only came in September.

The upside? Business runs in cycles. The recession means reduced consumption, but that creates pent-up demand that can help drive recovery. Marketers still in the game will have money to spend on advertising, promotion and other marketing programs. It will be up to media and non-media alternatives to make a play for those dollars.

In this article:
Most Popular