More than $25 billion in advertising revenues will be drained from media companies between January 2008 and December 2010, sparking an “advertising depression”, according to media economist Jack Myers.
Total US marketing communication budgets will decline by a staggering $56 billion during the same period – down 2.4% for 2008, -6.7% for 2009 and -2.3%, forecasts Myers.
“It’s not just economic,” Myers said in an interview with Dow Jones Newswires. “It’s secular and systemic. It’s like moving from an agrarian economy to an industrial economy. Anyone connected with the advertising business is challenged right now.”
The outlook comes as US consumer spending, which is the economy’s main source of economic growth, has considerably slowed down due to the current economic climate – Industries that are major ad categories, like financial services, automotive and retail are struggling.
A number of media outlets are downsizing as a result and even growth in online advertising, which was viewed as the industry safeguard, has slowed down.
Myers predicts that things are likely to get worse over the next three years – he forecasts an overall decline in total marketing budgets from 2008 through to 2010 for the first time since the “Great Depression”.
“Long-festering business problems for the media and advertising industries are coming hard now at the same time that the economy is tanking,” Myers said. “It’s very hard in a situation like this to make the changes that companies have needed to make for a decade now in any kind of orderly way.”
A number of other industry representatives agree with Myers – earlier this month ZenithOptimedia predicted that North America’s ad spend would fall by 5.7% next year (see ZenithOptimedia forecasts no growth in global adspend in 2009).
Merrill Lynch has also lowered its global ad forecast to 0.4% growth this year, with a fall of 1.6% expected in 2009 – Magna expects US advertising in 2009 to decline by 4.5%, while GroupM forecasts a 0.2% fall to $458 billion (see Merrill Lynch lowers global ad forecast).
Meanwhile, shares of the four global advertising holding companies have declined dramatically, along with those of the major media conglomerates – shares of Publicis are down 29%; WPP, 52%; Interpublic Group (IPG), 47%; and Omnicom Group, 41%.
“The big media agencies are trying to transform themselves and adapt, but their compensation models and their clients are obstacles to them doing that,” said Myers. “The creative agencies are huge obstructions to the changes that need to take place in media. The 30-second spot is no longer the be-all and end-all. The concept of how you communicate with consumers now is a consumer-controlled, interactive process.”
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