Skip to comments.May Ad Spending Down, First Monthly Decline in Four Years (Dinosaur Media DeathWatch™)
Posted on 08/22/2006 10:48:00 AM PDT by abb
Small Slip -- 0.3% -- Could Be Sign of What's to Come
By Bradley Johnson
Published: August 21, 2006 LOS ANGELES (AdAge.com) -- U.S. measured ad spending declined 0.3% in May vs. a year earlier, according to data from TNS Media Intelligence. That's a small slip, but it marks the first comparable-period monthly decline since the ad recovery began in May 2002. May's ad spend is down but forecasters predict moderate overall spending for the year.
Notable drop Ad forecasters still predict moderate growth in spending this year. But May's drop is notable, coming at a time when economic growth is falling and recession worries are growing. Gross domestic product growth slumped last quarter to 2.5% from 5.6% in the first quarter.
The last advertising downturn began with a similarly miniscule ad decline in December 2000. Then spending fell sharply in the first quarter of 2001, foreshadowing a recession that ran from March to November 2001.
Previous recession Ad spending continued to fall every month through April 2002 (except for a jump in February 2002, an anomaly related to a boost from the Olympics and the timing of the Super Bowl in February '02 rather than January '01).
Ad spending has risen year-on-year every month since May 2002 (except for a decline in August 2005, an anomaly that reflects the absence of Olympics spending that boosted August 2004).
Then came May's decline: Measured ad spending simply fell, the first monthly drop since 2002 that can't readily be explained away. Spending slipped 0.3% to $12.7 billion, held down by a dip in network TV (-2.8%) and a sharp falloff in local newspapers (-9.1%).
Bright spots There were bright spots in May. Internet advertising rose 18.6%; Spanish-language TV networks jumped 17%. Overall, measured ad spending between January and May 2006 rose 3.9%.
Measured spending, to be sure, is an imperfect indicator. The numbers are estimates and often are overstated based on rate-card rates. TNS's internet numbers also exclude a huge category: paid search. (Google, the leader in paid search, reported $4.7 billion in ad revenue in the first six months of 2006.)
May's 0.3% spending drop tracked with a 0.7% decline in U.S. media employment in May 2006 vs. a year earlier, according to an Advertising Age analysis of data from the Bureau of Labor Statistics.
Optimists can find hope in June's employment data. Media employment rebounded in June to about 859,000 jobs, the highest level since last December. Employment in the overall U.S. ad industry rose in June to 1.59 million, the highest level since December 2002.
Jobless recovery The flip side: Media employment remains 5.8% below the level of May 2002, when the ad spending recovery took hold. For media, this has largely been a jobless recovery. Advertising Age and Bloomberg's AdMarket 50, meanwhile, has fallen 5.7% since May 2002.
Now the industry will wait to see if May's ad spending slip was a blip -- or a sign of what's to come.
Men leave old media, revenues down.
Men go to new media, revenues up.
Madison avenues conclusion? ignore men.
At the peak merchants are not having any problem moving merchandise so they reduce advertising to improve profits.
As the cycle continues business starts to fall off and profits go down. Merchants look for ways to cut costs. The easest cost to cut is advertising. So they cut advertising.
Then at the bottom of the cycle, with shelves filled full of merchandise that is not moving, they realise they have to do something to encourage sales. So they increase advertising and the cycle begins all over again.