Much pain, little gain

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SEPT. 11

Sept. 11. What more can be said? The date alone has become shorthand for the horrendous sequence of events that left more than 3,000 dead and changed America's view of itself and its place in the world. Beyond the terrible human toll, Sept. 11 sent ripples into every corner of U.S. society, including media, marketing and advertising. Print, TV and radio news outlets cleared the decks of advertising to cover the unfolding crisis. More than $700 million in newspaper and TV ad spending was wiped out in the days following the attacks. Goldman Sachs analyst Michael Beebe estimated the lost advertising for the week of Sept. 11 would amount to 2% of 2001 ad revenue. Ad budgets, as well as ad themes, came under even greater scrutiny. Magazine ad revenue sank 9.6% in October; newspaper ad revenue fell 11.5%. New ad accounts plunged 81% in September. On the creative side, themes deigned to be "out" included images of the World Trade Center and the Grim Reaper. "In" themes included ads tied to charities and aid to Sept. 11 victims, appeals to patriotism, and the omnipresent image of the Stars & Stripes.


This was the year the soft landing turned into a hard crash. Year-end wrap-ups a year ago warned 2001 would show a slowdown from the days of the dot-com boom, but few expected print advertising would fall off a cliff, only to have other media follow. The dot-com carnage continued unabated as many e-commerce sites shuttered or sold out to offline rivals. Even before the Sept. 11 attacks made fears of recession largely academic, most forecasts for 2002 were being revised downward. In the aftermath of Sept. 11, analysts were willing to use the "r-word" openly, and even apply it to their 2002 forecasts. In late November, the National Bureau of Economic Research proclaimed the U.S. had been in a recession since March. There were hopes that the current downturn would be mild and over soon. Universal McCann's Robert J. Coen bullishly predicted U.S. ad spending would increase 2.4% in 2002 vs. a 4.1% drop in '01. Zenith Optimedia Group's John Perriss said spending fell 6% in '01, with a 1.5% drop seen in '02-the first two-year decline on record.


As U.S. ad spending sank in 2001, Census 2000 data kept the Hispanic market afloat. The census revealed the Hispanic population had grown 58% in a decade, vs. 3% growth for the non-Hispanic white population. The Hispanic market now tops 35 million, 2.5 million more than earlier Census Bureau projections, and makes up 13% of the U.S. population. With purchasing power of $453 billion, the Hispanic market drew a lot more attention from recession-wracked marketers and media, though it wasn't immune to the downturn. The recession cut the double-digit growth rate for the $2.1 billion Hispanic ad industry to mid-single figures, which was still way ahead of the general market. In October, NBC parent General Electric Co. said it would spend $2.7 billion to acquire Telemundo Communications Group, which runs the No. 2 Spanish-language TV network. Hispanic ad agencies also found new opportunities to show their work on mainstream media.

Ipg-Tn merger

Interpublic Group of Cos. bested considerable competition, including Havas Advertising and WPP Group, to acquire True North Com-munications, a Chicago-headquartered agency holding company thrust into play following the late-2000 exit of its biggest client, Chrysler Group. Acquired by New York-based Interpublic for $2.1 billion in stock, True North brought numerous high-profile clients, including Kraft Foods, Coors Brewing Co. and Clairol. True North's $1.5 billion in 2000 revenue combined with Interpublic's $5.6 billion created the world's largest advertising behemoth. True North's Foote, Cone & Belding Worldwide was positioned as Interpublic's third agency network. But FCB client PepsiCo took $300 million-plus in business to Omnicom Group, not wanting to be served by the same agency holding company as Coca-Cola Co. Interpublic's McCann-Erickson Worldwide gave up the $150 million Reckitt Benckiser account to avoid conflict with FCB client S.C. Johnson & Son.


Cross-platform ad deals-marrying media and marketing giants-inked in 2001 held out the promise of hundreds of millions of ad dollars over the next few years. AOL Time Warner, the premier cross-platform dealmaker, has put together $1 billion in such arrangements, said Co-Chief Operating Officer Bob Pittman. AOL Time Warner in 2001 drew in marketers including Burger King Corp., Cendant Corp., Chrysler Group, Kellogg Co., Kraft Foods and Nortel Networks. But the all-time biggest cross-platform deal went to Viacom, which tied the knot with Procter & Gamble Co. to the tune of $300 million. Walt Disney Co. struck its biggest cross-platform deal to date, with Toys "R" Us. News Corp. linked with Tricon Global Restaurants. Kraft crafted major pacts with Viacom as well as AOL Time Warner.

anti-drug ACC'T

When is a bill not a bill? When it goes to the federal government. Ogilvy & Mather, New York, learned that lesson the hard way in 2001 when its failure to provide either adequate documentation or follow the government's cumbersome accounting procedures put in jeopardy the agency's assignment from the White House Office of National Drug Control Policy. The problems sparked accusatory hearings, a continuing criminal investigation and eventually a rebidding of the contract. Ogilvy's problem was that it won the contract without having in place the required accounting system to properly track costs and to examine specifically what costs the federal government allowed. The WPP Group-owned agency eventually fixed its accounting system, but before it did, it had billed the government for costs Ogilvy now acknowledges it can't assure should have been billed. The government withheld millions from Ogilvy, but congressmen accused the agency of "fraud" and demanded the contract be rebid. At yearend, the rebidding was in process and Ogilvy appeared ready to try to retain the account.

Simon scandal

Longtime McDonald's Corp. promotion shop Simon World-wide, Los Angeles, expressed doubt over its viability due to repercussions after one of its employees was indicted on fraud charges. More than 50 other people were allegedly involved in the massive sweepstakes scam. McDonald's and Philip Morris Cos.-together representing 88% of the Simon's revenues-fired the company. That led to a feeding frenzy among Simon rivals to snap up accounts and staff.


Marketers started asking media agencies to look for alternatives to traditional broadcast and print advertising as they seek more efficient and highly targeted methods for reaching consumers. Creative media strategies also emerged in response to the evolution of a highly fragmented media landscape. In effect, marketers are reversing a long-held tradition of working with their creative agencies first and then going to their media buyers to execute. Creative media buying and planning took a $600 million jump in 2001 when Philips Electronics consolidated its global media business at Aegis Group's Carat International and gave its new agency the go-ahead to lead the marketer's ad strategy. Philips' move was an endorsement of a long-held theory of Carat CEO David Verklin that media planning and buying are where advertising's true creativity lies.

Magazine TOLL

If in 2000 the odometer for the magazine world ticked off each new thousand ad pages sold in new-economy titles, in 2001 it ticked off magazine closings. Hachette Fili-pacchi's George. Conde Nast Publi-cations' Mademoiselle. Time Inc.'s On. Hearst Magazines' Classic American Home. Ziff Davis Media's Expedia Travels and Family PC. Brill's Content. Working Woman. Maximum Golf. Mode. One. Walking. Imagine Media's Revolution and Total Movie. Individual Investor. And, of course, The Industry Standard. Some top magazine executives expect closings to accelerate in 2002. More bad news for print: NBC's December move to accept liquor ads could lead to a big shift to TV, putting about $300 million of magazine liquor advertising at risk.

0% financing

With Sept. 11 and the recession slamming car sales, General Motors Corp. started a no-interest finance war. Ford Motor Co. followed within 24 hours, and shortly later Chrysler Group and others. Zero interest spurred sales in October and November, though analysts cautioned the incentives were stealing sales from future months. Ronald Zarrella, GM's brand czar who rose to president of its North American operation, took credit for the no-interest deals during the teleconference announcing his return to Bausch & Lomb Corp. as CEO. Ironically, Mr. Zarrella's ongoing branding mantra had been that incentives decrease brand value.

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