Even as the banking giant looks to improve revenue in its consumer business, it has brought the hammer down on a raft of media companies. Cable deals have been killed in the middle of upfront negotiations and publishers have had to yank ads that were already scheduled to run in their magazines. Some have been warned that Citi might not be back until the second quarter next year.
"It's an earnings-related thing," said one magazine executive. "The promise was being held out that the second half was going to be big."
As high as $120 million
The amount being pulled from the market could be as high as $120 million. That's how much the bank laid out in cable, online and magazines in the second half of 2005.
The media owners find themselves in the middle of a dust-up between two Princes, so to speak, and their differing reactions to a stock that some analysts and investors believe is underperforming. Saudi Prince Alwaleed bin Talal, Citi's largest individual shareholder, has called for cost-cutting, something that CEO Chuck Prince has publicly resisted. In late July, the latter prince told The Wall Street Journal he refused "to starve the business" in order to kick-start the stock. But apparently his hand has been forced -- at least in terms of advertising investment.
A Citigroup spokesman issued a statement that -- PR wordsmithery apart -- sounded like a confirmation: "Our marketing and advertising programs are continuously reviewed and adjusted to align them with our business objectives. This is a fluid process which takes into consideration evolving market conditions and other developments. As always, we do not disclose details of our marketing spending publicly."
The cuts aren't expected to be long-term, according to executives at several media companies, who said they're a snap response to pressure from unhappy investors on a Citigroup stock that's lagged behind key competitors, such as Bank of America and JPMorgan Chase & Co. Though still the largest financial-services company in the world as measured by assets, Citigroup is being challenged by Bank of America in market capitalization, and BofA for the first time announced earnings that surpassed those of Citigroup's.
The consumer operations have been especially tough for Citigroup, though the company maintains it's on the upswing. Revenue at the consumer unit grew 1% during the second quarter, an improvement after a 10% decline over the first quarter. Of course, some might argue that's a good reason to boost ad spending at the unit, but evidently not all investors see it that way.
Last year, Citigroup spent more than half of its roughly $1 billion measured-media budget on the Citi brand. Mediaedge:cia and Starlink handle media planning and buying, while Fallon handles creative.
Light magazine spending
People familiar with the situation say this year magazine investment in particular has been light, with assurances made that forthcoming branding campaigns, previously scheduled for late this year, would make up for it. However, these people say those campaigns have been pushed back to 2007.
It was immediately unclear whether the pullbacks would affect network TV, where Citi is a heavy spender, largely on behalf of its consumer operations such as its credit cards and consumer bank.
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Contributing: Nat Ives and Willow Duttge