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Going Negative

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Just last month, GM confirmed that it was opting out of advertising in big TV events that had been major venues for years, including the 2009 Academy Awards and the Emmy Awards. And two weeks ago, the carmaker confirmed it was bailing out of the biggest TV advertising showcase of them all, the Super Bowl, because it couldn't justify the cost of an in-game unit (close to $3 million for a 30-second spot) given its marketing goals with tighter budgets for the year ahead, a rep confirmed.

Of course, GM is far from the only marketer on a quest for better ROI against its media spend. According to ad tracker TNS Media Intelligence, the top 10 U.S. advertisers continued to shift dollars to cheaper and more accountable media during the first five months of this year.

In the TV realm, for example, the top 10 spenders shifted a combined $170 million out of network and spot TV and into cable, which tends to cost less on a cost-per-thousand-viewers basis. The same 10 advertisers cut their combined radio budgets by 15 percent, or $60 million, while pumping close to $20 million more into the Internet.

And with the fragile economy, which seems to get hammered with more bad news with each passing week, many clients are now telling their agencies they will likely cut their spending budgets for 2009.

"This year has been challenging, and spending has flattened," said Rino Scanzoni, chief investment officer at GroupM, the management arm of WPP media agencies MindShare, Mediaedge:cia, MediaCom and Maxus. "But the real test will be 2009," he said, as marketers factor into their ad budgets the economic realities of soaring fuel costs, the mortgage crisis, the credit crunch and the resulting dip in consumer spending. "We're assuming 2009 will be flat at best," Scanzoni said. And it could be down by a low-single-digit percentage, he added.

No matter how you slice the data, spending is clearly trending downward. But as of last week, forecasters at Zenith Optimedia and Magna were sticking by revised predictions they issued at mid-year that spending for 2008 would climb by 3.5 percent and 2 percent, respectively. A rep for Magna said the shop's top forecaster, svp Bob Coen, would likely stick to his usual revision timetable and not issue a new forecast until December. Bruce Goerlich, evp of strategic resources at Zenith Optimedia, said his shop was currently revising its forecast but was not prepared to disclose new findings yet. "We're certainly not dancing in the streets about the numbers," he said.

Others agree that things may well get worse before they get better. "I think 2009 is going to be a very difficult year," said Steve Lanzano, chief operating officer at MPG North America. Clients are very nervous, Lanzano said, and many are looking at budget cuts for next year. "None of them want to cut budgets, but they have their own [profit] numbers that they need to hit. It's very daunting out there."

The top 10 advertisers were down a combined 3 percent in ad spending through the first six months of this year, to $8.7 billion, according to TNS. Six of the 10 curtailed their ad spending during that time, while four spent more. Procter & Gamble, the nation's top spender, was down 8 percent to $1.6 billion. The others that cut back were AT&T, down 16 percent; Time Warner, down 9 percent; Johnson & Johnson, down 12 percent; Walt Disney, down 9 percent; and Kraft Foods down 7 percent.

Those spending more were GM, up 13 percent; Verizon, up 8 percent; News Corp., up 11 percent; and PepsiCo, up 5 percent.

The automobile advertising category, like the industry itself, has been hit particularly hard this year. For the first half of the 2008, per Nielsen Monitor-Plus, U.S. ad spending by carmakers was down 8 percent to $5.3 billion. Through May (the latest company data available at deadline), Ford had cut spending by 35 percent compared to the same period in 2007, to $437 million. Chrysler was down 30 percent to $327 million, and Toyota was down 6 percent to $443 million.

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