While the Obama administration has plenty of challenges to keep it occupied as it tries to fix the economy, marketers and agencies are paying close attention for policy moves that might further dampen ad spending during the recession.
Chris Schembri, vp, media services, AT&T, said that taxes on advertising could potentially have a “monumental impact” on the telecommunications company’s ad spending, which averages around $2 billion annually, according to Nielsen Monitor-Plus. To the extent that taxes are imposed, he said, the company would have to “redirect” a piece of its ad budget to pay the tax bill.
He made his remarks today at a panel discussion presented by the Advertising Club of New York. David Verklin, CEO of Canoe Ventures (pictured), was the moderator.
One category with a big question mark hanging over it is pharmaceutical, said Rino Scanzoni, chief investment officer, WPP’s GroupM, as some pubic interest groups are waging a lobbying campaign to get the federal government to impose tighter restrictions on prescription drug advertising or possibly eliminate it altogether. Another potential regulatory issue that could result in ad cutbacks, said Scanzoni, is the prospect of new rules mandating a la carte program menus allowing cable subscribers to pick individual networks they want to watch and pay for. There is little doubt, he said, that such rules would result in some networks losing distribution that would impact advertising circulation “in a big way.”
As for the recession, the worst is probably yet to come, said Scanzoni, particularly for advertising where there tends to be a lag effect with spending cutbacks in reaction to declines in the gross domestic product and consumer spending.
Overall ad spending will likely be down 3 to 3.5 percent in 2009, according to GroupM forecasters, said Scanzoni. But with predictions of a 5 percent drop in GDP for the first quarter, he said ad spending could be in for a 4 to 4.5 percent contraction in late 2009 and 2010. “The challenges are more ahead of us than behind,” he said.
That said, Scanzoni also indicated he believes there are “huge opportunities” for some clients to gain market share in the down market by advertising when others are cutting back. Particularly those clients with a “value message,” he said.
Schembri said that AT&T’s strategy is to “stay the course and not flinch.” While consumers are spending less, they are still spending, he said, and it is important for marketers to communicate with them.
Schembri also said that AT&T has dollars reserved for testing bold new concepts or “beta ideas,” as he referred to them. “There’s a pool of money that exists for that very thing,” he said.
The company has advertised on Hulu, the Fox and NBC online video venture, and other services like it, Schembri said. While he believes in the online video medium, Schembri said more work must be done to determine the best models for placing online video ads well as discovering the optimum length of such ads.
Scanzoni added that improvements in measuring video across platforms would help quicken the shift of dollars online.
Another medium with a lot of unrealized potential is mobile video, said Schembri. In time, with the right applications and approaches, mobile video could have the power and impact of a broadcast network, he said. “We’re not there yet,” he stressed. And 2009 won’t be the year it happens. “But in 2010, ’11 and ’12 we’ll start to get some traction.”
As for the upfront, Scanzoni said it was “irrelevant. What matters is the total market,” which is likely to be down, although he didn’t offer a projection for the total national TV market.
Scanzoni said one of the brightest spots in advertising going forward would be addressable TV applications, where unique ads can be delivered to individual set-top boxes, depending on the needs and interests of the viewers tuning to sets with those boxes. In three years addressability will “completely change” the media landscape, he said. That was music to Verklin’s ears as CEO of a company that is coordinating the addressable capabilities of the country’s top cable operators.
But, Verklin cautioned, “privacy will be a big issue.” The industry needs to make a better case that addressability and related applications are “good for the consumer,” he said.