This is the question being posed by market analysts currently, after recent worries over corporate profitability and a waning consumer confidence have raised the spectre of an economic dip into a second period of recession.
The notion was given further credence by comments from WPP chief executive, Sir Martin Sorrell, who warned earlier this week that his company is unlikely to maintain its previous 14% operating margin this year, adding that there is unlikely to be any pick-up in advertising conditions for the remainder of the year (see
WPP Warns Of Little Ad Improvement This Year).
There are fears, particularly in the US, that falling consumer confidence is starting to temper advertisers’ spending; the latest round of newspaper financials revealed poorer than expected ad revenues (see ‘Muted And Uneven’ US Press Recovery Predicted By Merrill Lynch). Sorrell has warned that recovery may not really start to be felt now until 2004.
Jack Myers, of Myers Reports, quotes one global analyst as saying that there is currently a discrepancy between the fairly bright outlook being offered by media owners on the one hand and the downbeat statements coming from ad agencies on the other.
This may partly be due to the fact that increased media bookings are taking place in anticipation of a strengthening general economy, whilst the ad agencies are reporting current conditions, Myers quotes Ira Carlin, chairman of Magna Global, a media buying organisation owned by Interpublic, as saying.
Analysts at Merrill Lynch believe that advertisers are rationalising their spending in the face of economic uncertainty. The broker also notes that media companies are likely to see increased spending before the agencies do, as there is a lag effect, with advertisers running older campaigns for a longer period of time.
