In the current volatile and uncertain climate, media suppliers are faced with the difficult prospect of generating cost savings whilst cutting cost per thousands, according to Jack Myers, chief economist at Myers Reports.
Myers says that the long-term strategies that corporations were building as recently as 1998 – pre dotcom boom – were based on sustained increases in advertising revenues. The explosion of the online and IT-related industries in 2000 and 2001 led companies to believe that these estimates were too conservative and so they were subsequently revised upwards.
The events of 11 September, whilst clearly having a strong negative impact on the economy and advertising, are not really the cause of media’s problems, says Myers. “The root cause is an over-supply of media options, combined with major underlying shifts in the marketing strategies of major corporations,” he says.
There is little reward from the markets for forward investment, with investors preferring to gauge a company’s performance based on whether it achieve revenue targets or not. This creates a difficult situation for media suppliers, caught between investment and cost cutting: “Media suppliers are now confronted with the challenge of maintaining ad revenues while costs-per-thousand decrease. They also recognise the importance of developing and exploiting new marketing capabilities and new measurement tools to quantify their value,” says Myers.
The challenge is to accomplish both business objectives, whilst ad revenues continue to fall below projected levels. The figures below show that ad revenues are growing at a lower rate than had been expected in 1998. Following the boom markets of 1999 and 2000, longer-term forecasts were increased. “Now, as reality has set in, they are going back to the drawing board, eliminating new lines of business, planned expansion and are cutting back on staff. They are focusing on the core selling tradition of media: cut prices and go for a greater share.
“Ultimately this could prove to be a failed strategy if the result is a rejection of continued investment in new technologies… Conversely, it could be a successful strategy if cheaper media pricing attracts new advertisers and more spending from traditional advertisers,” says the Myers report.
| Media Spending 1998 – 2005. Comparison of January 1998 Projections To Actuals/Current Projections |
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Broadcast Network TV |
Cable Network TV |
National Spot TV |
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| ÂÂ |
ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ 1998 |
ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ Current |
ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ 1998 |
ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ Current |
ÂÂ ÂÂ ÂÂ ÂÂ 1998 |
ÂÂ ÂÂ ÂÂ Current |
| 1998* |
14,840 |
14,297 |
6,159 |
6,560 |
10,782 |
10,659 |
| 1999* |
15,200 |
15,398 |
7,200 |
8,003 |
10,800 |
10,500 |
| 2000* |
16,800 |
16,988 |
8,150 |
9,764 |
11,900 |
12,264 |
| 2001 |
17,000 |
15,950 |
10,100 |
9,569 |
11,900 |
9,811 |
| 2002** |
18,500 |
14,515 |
13,200 |
8,803 |
13,000 |
8,828 |
| 2003 |
20,500 |
14,515 |
15,700 |
9,550 |
13,500 |
8,750 |
| 2004 |
22,500 |
14,750 |
16,000 |
10,500 |
14,100 |
8,837 |
| 2005 |
23,500 |
14,750 |
18,150 |
11,240 |
14,800 |
8,572 |
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| Source: Jack Myers Report, 29/10/01 |
