2002: The pain lingers-of 9/11 attack, economic downturn

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9/11 II

American consumers showed their resilience in the months following the Sept. 11, 2001, terrorist attack. In fact, consumer spending remained one of the few bright spots in 2002's gloomy economic picture. In an Advertising Age online survey focusing on "The New Normal" after 9/11, 57% of respondents said their spending hadn't changed since the attacks. But as the first anniversary of 9/11 neared, advertisers and media grappled with how they would respond. Even though Americans were out there spending and a vast amount of TV and print coverage of the anniversary was inevitable, many consumers showed uneasiness with the idea of an unabated ad blitz on that solemn day. More than half of U.S. consumers responding to an Ad Age survey thought marketers should go dark on Sept. 11, AA reported in August; only 34% found it acceptable to run any advertising on the anniversary of 9/11. But only 28% said they'd view a marketer negatively for running ads on Sept. 11; just 10% would view the companies positively. Rich Hamilton, CEO of ZenithOptimedia Group Americas, bluntly told Ad Age: "The anniversary of Sept. 11 is not a good day to sell hamburgers."

Corporate catastrophes

It wasn't islamic terrorists who blew away an estimated trillion dollars in retirement savings; it was homegrown, entrepreneurial business executives. The alphabet for corporate scandal ranged from Adelphia to WorldCom. Thousands of employees at these companies lost their jobs. As the companies' stock tumbled, investors fled the market, draining mutual funds. Among those companies that filed for bankruptcy in 2002: Adelphia Communications Corp., Global Crossing and WorldCom. Enron Corp. beat them to the punch by filing in December 2001. The public learned more than they ever wanted to know about topics including off-balance-sheet partnerships, restated earnings, EBITDA, pro forma results and corporate governance. In an environment where corporate responsibility became a key concern, a giant like Coca-Cola Co. could score major PR points by what previously might have been the most mundane of announcements-its overhaul of accounting for stock options.

Rebound revised

The economy took the ad industry on an uncertain, discouraging ride in 2002, but occasionally, there were lights in that dark tunnel that gave hope of a better 2003, if not a full-fledged rebound. The first of those lights may have been the TV upfront, where broadcast networks raked in 20.1% more ad dollars in prime time than last year, to top $8 billion; total upfront sales climbed 15.2% to $15.8 billion. Last year, TV revenue fell for the first time in a decade. Observers had worried the strong upfront would weaken the scatter market, but scatter pricing is 15% to 20% above upfront. For magazines, the suffering seemed to lessen as the months ticked off. Ad pages through November were down 4.5%, vs. a year ago, according to Publishers Information Bureau. A year earlier, pages had slid 10.9% through November. Some publishing executives predicted that fourth-quarter upturns would mean ad sales for the year would be essentially flat. Universal McCann forecaster Robert J. Coen earlier this month predicted a 2003 ad upturn, barring such nastiness as war.


2002 bore witness to the growing enthusiasm-angst in some quarters-for branded content and other manifestations of advertiser-driven entertainment. With no end in sight to media fragmentation, and personal video recorder penetration poised to spike with cable companies' plans for including the technology in next-generation set-top boxes, advertisers became even more receptive to the allure of the entertainment industry. Revenue-hungry studios, networks and record labels also saw the opportunity in this convergence of Madison Avenue and Hollywood, a trend dubbed Madison+Vine by Advertising Age.

AOL Time Warner woes

You've got problems! AOL Time Warner hit the skids-hard-after some creative accounting moves came to light. The company opened the year with a $57 billion charge to earnings to reflect the decline in its stock since the merger of America Online and Time Warner in 2001. Federal investigators came calling after The Washington Post reported America Online had manipulated revenue leading to the merger. As expected, shareholders sued. By fall, Jay Leno joked that the initials AOL stood for "Ask Our Lawyers."

Crying for Argentina

Ad spending in Argentina fell by more than 40% in 2002, but the devastated economy may have finally hit bottom by yearend after four years of recession. Not a moment too soon. Marketers pulled upscale products from the shelves, especially those requiring imported materials that became prohibitively expensive, and put their meager ad dollars behind the cheapest, most indispensable products in their portfolios. Whole ad categories like cars and telecommunications disappeared for a time. Media went bust, and ad agencies struggled to win projects they could handle for other countries. But in one of those miracles of Argentine ingenuity, Buenos Aires agencies continued to be big winners at the Cannes international ad festival.

Getting in the mix

Liquor marketers in 2002 sought new ways to advance beyond print and cable media for their advertising, with network TV positioned to benefit. Diageo, the world's largest spirits marketer, was at the forefront. Late in 2001, General Electric Co.'s NBC rebuffed the broadcast networks' voluntary ban on liquor ads, saying it would accept advertising for Diageo's Smirnoff vodka. Rival CBS, owned by Viacom, was said to be ready to accept spirits ads if NBC proceeded, and observers expected the floodgates to open for liquor ads on TV. But then NBC reversed course last March under pressure from groups like Mothers Against Drunk Driving. Marketers, however, found another way to get their long-established brands into TV advertising by pasting the names of hard-liquor products onto malt-based alternatives. Though the alt malts contain none of the spirits of their namesakes, the drinks-including Diageo's Smirnoff Ice-flew to network TV. Critics said the so-called "alcopops" attracted underage drinkers. The whole issue of targeting underage drinkers is likely to heat up in 2003.

Bid-rigging scandal

As news spread of the march arrest of Mitchell Mosallem, former exec VP-graphics services at Grey Global Group's Grey Worldwide, New York, on charges of mail fraud arising from alleged participation in a bid-rigging scheme, numerous agencies and graphics suppliers reassessed longtime business practices. In addition to Mr. Mosallem, who was indicted by a federal grand jury later in 2002 for mail fraud and conspiring to rig bids and defraud certain Grey clients, a Justice Department probe led to indictments of more than 20 execs. They included Haluk Ergulec, founder and former head of graphics services company The Color Wheel. Mr. Ergulec pled guilty last month to various charges.

Adios Ayer, D'Arcy

Two of the industry's most fabled agencies, N.W. Ayer & Partners and D'Arcy Worldwide, died in 2002. Ayer's end, announced in April by Roger Haupt, CEO of parent Bcom3 Group, surprised few. Ayer at its best boasted of blue-chip clients like Procter & Gamble Co. and General Motors Corp. At the end, its clients were solid names-Continental Airlines, Villeroy & Boch-but far more modest-spending brands. Commented Mr. Haupt: "I'm not somebody who believes in extending names for the sake of extending names." Viewed as a bold move made by its new owner Publicis Groupe, the October decision to shutter 96-year-old network D'Arcy stunned many. D'Arcy leaves a rich legacy, from Coke's red-cheeked Santa to "Look Ma, no cavities!" for P&G's Crest.

Cars chug along

Incentives such as 0% financing gave carmakers another push in 2002, and such tactics are expected to continue in 2003. General Motors Corp. kicked off the latest round of 0% offers after Sept. 11, and its Detroit rivals followed suit. Low interest rates and consumer confidence also helped, and Advertising Age sibling Automotive News predicted 16.6 million light vehicles would be sold in 2002, down from 2001 but still the fourth-best sales year ever.

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