The War’s Effect On US Advertising
At present, the advertising industry is characterised by uncertainty as marketers try and get a handle on the likely effect of world events on the general economy. The pervading feeling is pessimistic but a number of media observers are convinced that the war is not wholly to blame for the stagnation of activity.
“Advertisers have learned that they need to spend during the good times and bad; having indicated that, there is still some surprise, and concern, that media is holding up as the economy weakens,” she said.
Jack Myers argued this week that there are so many unquantifiable elements that it is almost impossible to assess the impact that the war will have on the media economy (see Myers Sticks To Adspend Forecast Despite Uncertainty). Fine concurs with this and states that analysts will need to have a better idea of the length and nature of the Iraq conflict before they adjust their 2003 forecasts.
At present, Merrill Lynch is predicting growth of 3.7% in the US (excluding direct mail) and 2.7% across the globe (see Merrill Lynch Lowers Global Advertising Forecast). Advertisers were understandably circumspect in the first few days of the war but have since put matters into perspective and overall strategy remains largely unchanged.
Analysis by medium Merrill Lynch has already downgraded its newspaper ad revenue growth forecast for the first quarter from 4% to 2-2.5% (see US Newspaper Industry Holds Breath Over Conflict) but this was largely the result of a disappointing February. While the sector has not been helped by cancellations and postponements since the outbreak of hostilities, the weakness is more likely to be linked to “the related slowdown in consumer spending and deterioration in consumer confidence”.
It is also suggested that the war’s effect on television revenues has been overstated. In the first nine days of the conflict, the main four broadcast networks lost an estimated $90MM in advertising time that was pulled as wall-to-wall coverage became the norm. However given the time zone difference, most of the preemptions have taken place during daylight hours as opposed to prime time and Merrill believes that March could be flat rather than down.
Concerns over the situation in the Middle East prompted Merrill Lynch to downgrade its Q1 radio advertising forecasts last month (see US Radio Outlook From Merrill Lynch). However, it has not adjusted its growth assumptions for the rest of 2003 on the basis that advertisers will shift rather than cancel spending. Even before international affairs came to a head, analysts were looking at 2004 as the year when real recovery would occur.
As regards other media, magazines benefit from a long selling lead time and revenues have increased by almost 10% in the year to date. Similarly, business-to-business and outdoor advertising appear to be holding up relatively well.