Current Ad Growth Bubble May Not Hold, Warns Myers

In the US, revenue growth is on course to outperform the global average, leading the way to recovery. Radio has had a very good recent run and television is looking strong too, with much better than expected upfront markets. Confidence from marketers and media buyers is therefore pretty high in the States.

But is this enthusiasm misplaced, asks Jack Myers. “Is it possible that the current semi-euphoric enthusiasm for the burgeoning media marketplace represents another expanded bubble that is about to burst?” he asks in the daily Jack Myers Report.

Marketers and media buyers say “no”, he claims. “Perhaps not in the short term, but let me be the first to publish a concern for the media economy in the second half of 2004 and into 2005. Media companies should begin now to prepare for the possibility of a market slowdown, if not a collapse, in the fourth quarter of 2004,” is Myers’ grim intimation.

He notes that a slowdown could come even sooner, given the range of exogenous circumstances that could affect the ad industry: War in the Middle East; war in North Korea; [US] domestic terrorism; continued slowdown in consumer confidence and spending; sudden falls in the stock market and potential new disclosures of corporate malfeasance.

After holding conversations with senior marketers, Myers believes that even if all of these factors were to occur, they would not significantly affect 2003 ad spending. Marketers see advertising as an important resource for maintaining market share and will be more aggressive in a tough climate, says the report.

“We’re in what appears to be a reverse cycle: as the general economy slows, marketers must fight harder for sales and the importance of advertising increases. This is far different from past recessionary periods when advertising budgets were slashed and ad recovery lagged the general market conditions by at least six months,” says Myers.

Confidence survey Myers’ confidence survey (see US Marketers Confident Of Increasing Budgets In 2003, Finds Myers) shows that 80% of advertising executives believe that the media industry has at least partially recovered from the downturn, but 63% reckon that the recovery is only partial and that there is room for additional short-term growth.

The survey also shows that the network television market has almost completely recovered, but print remains in recession with an upturn not expected until late this year.

Concerns for 2004 However, Myers says that another year of near double digit gains in costs-per-thousand will inevitably drive marketers into alternative media. In addition, marketers are not prepared to maintain the expanded budget levels that they have established for 2003, says the report.

“A strong 2003 upfront season will assure market strength for the next 12 months across several media, not just television, well into 2004. But beyond that, market conditions are uncertain at best.

“The good news is that we appear to have a clear path for two more years of growth. But, as we approach 2005 media suppliers should be cautious in their expectations; 2005 may seem like a long way off, but the next upfront covers the period from September 2003 to August 2004. If my concerns are accurate, then the 2004/05 upfront will be a tough one for the sellers,” Myers warns.