While some economists fear that the US economy borders on recession, especially in the wake of the Federal Reserve’s bailout of AIG last week, there is little doubt that the marketing and media industry is already suffering.
William Morrison, partner and senior Internet analyst for ThinkPanmure, has posited that the industry is in the second phase of a media recession — a period marked by the cancellation of any “up-front” commitments and contracts.
“Our research suggests that we entered phase two of the current media recession during the third quarter,” Morrison said in a September 15 industry update, following conversations with publishers reporting cancelled advertising contracts.
Just two weeks ago, AOL publicly announced that its network advertising had softened in the auto, financial, telecom and travel industries, and indeed had experienced cancelled contracts. Morrison pointed out that any optimism that accompanied this news has since faded, and added that, while finance and travel categories will take a hit, “the auto category is likely to see the most significant cuts during the second half of 2008.”
His firm’s research suggests that GM’s public announcement that it was slashing its ad budget will indeed affect online advertising. And, eMarketer has twice revised its estimated online ad spend in 2008. Initially, it had forecast $27.5 billion; that fell to $25.9 billion in March and $24.9 billion last month.
While this news might send many to revise their marketing budgets, others see opportunity in a downturn. “It’s during a recession that a brand should position itself as the leader in its category. It is the best and least expensive time to gain market share,” said Robb Hecht, digital marketing strategist for IMC Strategy Labs. “The positive effect of our downturn is that online publishers will increasingly be more open to negotiating deals.”
While these environmental conditions will allow savvy advertisers to shift more of their budgets towards affordable display ad opportunities, Hecht agreed with most experts that search and direct response mechanisms will be the dominant media channels in the short term.
“The Internet remains the vehicle of choice for direct marketers [vs. brand marketers] and, in a recession, the focus is on lead acquisition and getting a return for every dollar spent,” said Hecht.
Another low-cost opportunity for advertisers online is social media. Not only does the medium offer an efficient and effective means of extending reach, but it can result in high engagement levels when properly executed.
“Brand engagement studies show that the impact of placing advertisements on the quality long-tail site — such as a social network — exceeds the impact of broader sites because consumers are favorable to the advertisers who support their favorite niche sites,” Hecht said.