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At the opening of the Association of National Advertisers' convention 10 years ago, Fortune Managing Editor Marshall Loeb stunned attendees with a grim report: The stock market had crashed. The Dow fell 508 points on that Black Monday, Oct. 19, 1987.

"It's too late to sell and it may be too soon to buy," Mr. Loeb advised. "So stand pat for now."

As the ANA meets again this week, an informal survey of key media companies, marketers and ad agencies finds bullishness about the economy and ad spending growth coupled somewhat uncomfortably with nervousness about sky-high stock prices.


The consensus: A stock "correction" is inevitable but won't derail a robust economy. Advertising, tied to the economy, should chug along unaffected.

"Most of the commercial world is still really bullish," said Jeff Goodby, co-chairman of Goodby, Silverstein & Partners, San Francisco. Asked about his contingency plan if there is a stock correction, he said, "I don't have one."

Mr. Goodby is in the majority. Many executives echo the theory that things are different this time-that baby boomers are investing retirement money for the long haul, that advertisers are committed to long-term brand building and won't panic.

Others, though, say there's often a difference between what people say they'll do in a certain scenario and what they actually do when confronted with the reality of the situation.

"It's very easy to talk and pontificate when times are good. But business is cyclical, and you're going to have a downturn," said Gregory Coleman, Reader's Digest senior VP-worldwide publisher. "It will be very interesting when the water gets wildly choppy to see what boats are still out there."

Added Geoff Dodge, publisher of Money, "Everyone rides the wave together, and we suffer together if the wave crashes."

"If history holds true, what goes up must come down, so everyone is waiting to see if history repeats itself," Mr. Dodge said. But "corporate profits continue to be strong, and as long as corporate profits are strong, advertisers will continue to spend money."


Robert J. Coen, senior VP-director of forecasting at McCann-Erickson Worldwide, New York, estimates U.S. ad spending this year will reach $186 billion, up 6.2% over 1996 and 69% over '87. At mid-year, Mr. Coen projected a 5.6% gain for 1998, and he's now preparing to revise that upward a bit based on favorable economic data.

"I would be a little more optimistic," said Mr. Coen.

And what of stock prices? "I think the markets are too damn high," he said.

But Mr. Coen, who has tracked ad spending since 1950, contends there's little correlation between stock prices and overall ad spending. Even if the market plunged 25%, an advertiser "would have to be an idiot" to cut marketing when business was still plugging along, he said. "The stock market isn't the measure of the economy."

Yet advertisers increasingly appear to be delaying ad buys until the last minute-or later. Chris Little, president of Meredith Corp.'s publishing group, said advertisers are making more late tactical buys in response to factors such as faster product cycles and better data on what's working and selling.

"We'll see situations where we've closed an issue of a particular magazine, and two or three days after close, we'll have several advertisers come in" asking for an insertion, he said.


With more advertisers making last-minute decisions to buy in, it's conceivable more would be primed to make last-minute decisions to opt out after a crash.

That's probably less likely in TV, where Arnie Semsky, BBDO Worldwide's exec VP-worldwide media director, noted most money has been committed with upfront buys through most of next year.

But, he added, "I think advertisers are cautious. A number of them are saying the bubble is going to burst on the economy and the stock market, but they've been saying that for nine months."

Unlike Mr. Coen, however, Mr. Semsky believes that "If there's a downturn, you'll see advertisers calling their cancellation options."


Bearish indicators are everywhere: Revenue growth is slowing at Intel Corp. and Microsoft Corp., two of the market's key drivers. Intel's third-quarter profits missed analysts' projections. For every headline about more record earnings at a Ford Motor Co. or First Union Corp., there is bad news from a blue-chip name such as Eastman Kodak Co. or Gillette Co.

And there are signs some advertisers still reach quickly for the cutoff switch on their ad budgets when times are tough. Gillette, for example, cut second-quarter ad spending this year in part to boost quarterly earnings at a time when profit growth was depressed by the strong dollar.


A bit of history: Immediately after the '87 crash, advertisers claimed the crash would have limited effect on their companies or budgets.

For the most part, optimists were correct; the economy didn't fall into recession until 1990, nearly three years after the crash.

U.S. ad spending has increased every year since 1980 except for 1991, when spending during the recession dipped 1.6%, according to Mr. Coen.

Consumer marketers' post-crash comments were correct that people would keep buying toothpaste and Big Macs. But there were casualties, mostly within the monied set: BMW sales skidded 16% in 1988. Circulation of The Wall Street Journal fell 4.7% in the year after the crash and has never recovered to its pre-crash level.

Black Monday, in fact, cast a pall over Madison Avenue that didn't lift until the economy came out of recession early this decade.

Advertising Age headlines in the months after the crash told the mixed story: "Advertisers hold firm." "Carmakers keep pedal to the metal." But also: "Ad billings show little growth." "Newspapers slump." "Overseas hot, U.S. not." "Ad agencies braced for another hard year."

If the market does take a dive, executives point to the obvious suspects for trimming ad budgets: financial advertising, luxury vehicles, leisure travel.

If stocks take a fall, said the head of an agency for a major mutual fund company, there would be "a collapse of what appears mostly to be aggressive media spending."


Yet others say a correction is unlikely to cause brokers and mutual funds to gut marketing budgets. In the past, brokerages and mutual fund houses may have considered marketing expendable, but they increasingly are consumer-oriented companies that depend on brand recognition.

It's a bull market now for investment ads. Brokers spent $328.1 million in 1996, up 49.1% from 1995, according to Competitive Media Reporting. Mutual funds spent $168.5 million, up 32.9%.

Much of the money in the mutual fund industry is tied up in employee retirement and savings plans that people are more or less locked into, said Jeff Bobroff, president of Bobroff Consulting.

Paul Atkinson, VP-advertising at the Journal, said major financial operations, such as Fidelity Investments and Merrill Lynch & Co., are talking about issues-customer service, breadth of product-that go beyond performance.

Case in point: First Union Corp. is preparing 1998 ads for its Evergreen mutual funds stressing how most of its managers were on the job in '87 and have the experience to navigate difficult markets.

Jim Garrity, senior VP-advertising, said the message should work next year in a bull or bear market.

But that doesn't mean consumers won't bolt.

"At least 50% of mutual fund investors today have come in since the crash," Mr. Bobroff said. "They don't have the stomach necessarily for such volatility."

The outlook for technology spending, another linchpin of the current ad market, remains bullish. Though home PC sales could fall after a stock crash, Mr. Atkinson and Kelly Conlin, president of International Data Group, said the favorable long-term outlook for business technology sales will ensure a steady flow of tech ads.

Still, it's possible that some tech advertising will get cut in a downturn since many tech companies advertise to legitimize their stock among investors, said Jeff DeJoseph, director of brand planning and communications at J. Walter Thompson USA, New York.


The fortunes of retailers are tied to the mood of consumers, and some high-end merchants are showing signs of strain. Gucci Group posted strong growth in the first half, but the stock plunged in late September because of slow growth in its latest quarter. Other retailers, such as Abercrombie & Fitch, have achieved success by selling more than two-thirds of product for full price.

For more basic categories such as fast-food, marketers look for business as usual regardless of what happens with stocks.

"If the market tanks, people are still hungry," said a McDonald's Corp. spokesman.

Overall, nervousness about stock prices isn't translating to caution among advertisers, agreed Bill Whitehead, CEO of Bates North America. Some are being very aggressive in 1998 spending plans, and there has been no change in the mix of media dollars, he said.

"All of our multinational clients have been very aggressive in the marketplace. Everybody looks very positive and very strong," Mr. Whitehead said.

It's hard to find cautious skepticism when the economy, ad market and stocks are humming along. One week before the '87 crash, a magazine publisher complained to Ad Age: "People are almost obnoxiously optimistic this year."

That bears repeating.

Contributing: James B. Arndorfer, Mercedes M. Cardona, Alice Z. Cuneo, Jean

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