Advertisers retrench amid huge losses

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The advertising industry is getting slammed as a result of the Sept. 11 terrorist attacks, as marketers scrutinize budgets and campaigns, media companies post wide losses, and businesses cut back travel and other expenses.

"Advertisers are very skittish right now," said Jack Myers, publisher of "The Jack Myers Report," which issued a revised projection for the ad industry in the wake of the attacks. On Sept. 19, Myers forecast ad revenue would decline 7.4% next year, compared with an August projection of a 1.7% decline. Myers also stuck with a worst-case scenario of a 6.6% drop in ad revenue for the rest of this year and said it would be mid-2003 before the ad economy picks up.

Media companies lose big

In the immediate aftermath of the attacks, several media companies reported sharp losses as a result of non-stop network TV coverage and a temporary halt in advertising and warned of further losses in the fourth quarter.

Viacom Inc., which owns CBS, said its earnings for the year would be lower than expected because of a "significant loss" of advertising revenues and increased costs, although the media company did not release any hard numbers.

Viacom, which generates about half of its revenue from advertising, also reported lost revenue from the cancellation of the Latin Grammy Awards and National Football League games.

Canceled campaigns

The New York Times Co. said advertising revenue for its newspaper group declined 20% in August, compared with a record gain of 9.8% for August 2000. The media company said results for September and the third quarter would be "adversely affected" as a result of the terrorist attacks.

Many advertisers revised campaigns to make sure they delivered the right message. Some reacted with charitable efforts that affected their ad schedules.

Nortel Networks Inc., Brampton, Ontario, donated $3.5 million in advertising space—the rest of its TV ad inventory for this year—to the American Red Cross for use in educational and fund-raising efforts. "Given what many of our customers in New York are going through, we thought it was the best use of our TV time," said Emma Carrasco, VP-global advertising and branding for Nortel.

Carrasco said Nortel will not be running any TV spots for the rest of the year. It had planned to continue broad, brand-building campaigns. Instead, it will boost spending on interactive marketing and continue its print schedule. "We are focusing on more one-on-one advertising, and the Internet is becoming huge for us," she said.

Carrasco said no decisions have been made about where to buy additional online media, or how much. She also said it was too early to comment on the next TV campaign, although she noted "the message that is important to get out is that we are getting back to work."

Intel Corp., Santa Clara, Calif., said it was delaying the launch of its Pentium 4 chip campaign, which was scheduled to run at the start of the fall TV season. The new fall TV season began last week, but Intel said it had not made any decisions about when it would launch the campaign. A company spokeswoman said Intel is continuing its "Macroprocessing" campaign, which launched earlier this year in print, online and outdoor, because those media have not been as affected by the coverage of the attacks as has television.

If advertisers do attempt to cancel ads previously scheduled, there are legal and economic implications for both parties.

Doug Wood, executive partner at Hall Dickler Kent Goldstein & Wood, New York, said many of his clients were investigating canceling ads and had questions about their obligations. "They want to know, ‘If I cancel a production contract, can the [terrorist] event be used as an excuse?’ The answer is no," Wood said. " ‘If I want to change the content, will networks agree to change the production schedule?’ The answer is no."

Getting back to work

While all this is being sorted out, many ad agency executives echoed the message of getting back to work, and said advertising in the short term is likely to carry this theme as Americans try to move forward.

"I prefer the phrase ‘return to normal’ over ‘business as usual,’ " said Rich Hamilton, CEO of global media planning and buying agency Zenith Media North America, New York, which is located less than a mile from the World Trade Center site.

"Part of returning to normal at Zenith is to revise the forecast," he said, although the company has decided not to revise its ad projections until its regularly scheduled time in November to get a clearer picture.

Carl Anderson, president-CEO of Doremus & Co., the b-to-b agency of the Omnicom Group, said that while his agency’s clients were holding firm on programs for the balance of the year, two events could change things considerably.

"Some measures made by the government to retaliate could alter the course of events in terms of marketing communications," said Anderson, who witnessed the second plane crashing into the World Trade Center from the rooftop deck of his agency’s building in lower Manhattan. "That, coupled with the markets. If they continue to deteriorate as they have, that obviously could have an impact on how companies decide how much money to put against communications efforts overall. Barring either of those two things, I think we’ll stay the course."

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