Media sellers, beware: Telecoms are tapping the brakes in ad spending. For that , blame the phone in your pocket.
AT&T's U.S. ad spending in 2011 dropped 21% to $2.36 billion, causing it to slide to No. 5 in U.S. spending from No. 2 in 2010. Verizon saw a similar drop between 2009 and 2010 as U.S. ad spending fell 18.8% to $2.45 billion, though it did rebound some last year to $2.52 billion. Even so, any slowdown in spending isn't good news for the ad industry, considering telecoms fuel the country's third-largest ad spending category.
What's causing the pullback?
Saturation, for starters. When nearly all Americans tote mobile phones, there's less need to urge consumers to buy one. Instead, carriers are looking to get existing customers to upgrade to smartphones and pay for more data -- typically by using more online and direct marketing and less splashy national TV, print and outdoor advertising. Today 234 million Americans over the age of 13 are mobile subscribers, according to ComScore; as of May, slightly fewer than 110 million of them had data-devouring smartphones.
"Strong smartphone sales drive strong data sales, and data drives this business," said Ralph de la Vega, president-CEO for AT&T Mobility, during an April earnings call. Both AT&T and Verizon turned a profit in the first quarter, thanks in large part to selling more data to existing customers. As AT&T looks to grow its smartphone set and keep subscribers happy, it's spending significantly less on measured media.
"As with most major marketers, we have shifted some of our marketing support from more traditional media to new innovative ways to engage our audiences," said Esther Lee, senior-VP brand marketing, advertising and sponsorship for AT&T, in a statement. "As we experiment with all sorts of new engagements, these funds will not necessarily show up as media spend."
One such experiment is AT&T's web series, "Daybreak," written and produced by Tim Kring, creator of Fox's "Touch." Fox will help promote the series, but production costs are unlikely to show up in measured-media tallies.
The spending slippage follows a boom decade for telecom. Both AT&T and Verizon began to ramp up ad spending in the 2000s as mobile phones became mass products. By 2007 -- the year the iPhone made its debut -- both companies were up above $3 billion in ad spending, according to Ad Age DataCenter. Since that peak, outlays have ticked down.
While the telcos may be spending less, other parties in the mobile ecosystem are spending more than ever as they look to steal share from one another. Apple spent $500 million in U.S. measured media for iPhone and iPad last year, according to Kantar Media. Another leading smartphone manufacturer, Samsung, just launched its biggest ever U.S. campaign for the Galaxy SIII. Samsung spent $142 million in U.S. measured media on its Galaxy tablet and handsets last year, per Kantar.