Challenging Year Ahead for Ad Industry

2012 might not be the worst year agencies and marketers have seen recently—but it definitely won't be the best

Media agencies have shrunk their ad spending forecasts, Publicis Groupe is clamping down on hiring and salaries, and MDC Partners CEO Miles Nadal is seeing a deceleration in marketer spending. Looks like 2012 will be another tough year.

Agency leaders, however, remain confident—at least publicly—that the market will continue to grow, albeit modestly and unevenly among brand categories. The forecasters at ZenithOptimedia, Magna Global, and Group M now predict between 4 percent to 6 percent growth in global ad spending next year—that is, flat to slightly up from this year. It’s nothing to be bullish about, but it is better than the dregs of 2008.

Of course, should the European debt crisis worsen, those estimates could prove woefully optimistic. Also, uncertainties surrounding the U.S. housing market and the outcome of next year’s presidential election (and its impact on business regulation) gnaw at even somewhat optimistic agency chiefs.

Mike Sheldon, CEO of Deutsch/LA, whose accounts include Volkswagen of America, Sony PlayStation, and Dr Pepper, believes that “it won’t be a solid recovery” until the housing market bounces back. “The purchase of a home is the ultimate act of self-confidence,” he notes. As such, Sheldon envisions a “slow and wobbly” rebound for the ad industry.

Likewise, Merkley + Partners CEO Alex Gellert anticipates uneven or inconsistent growth next year in which some brand categories pick up and others do not. And given the mixed signals in the marketplace, “the new normal is not knowing” for sure how the economy—and brands—will make out, Gellert says.

TBWA CEO Tom Carroll expects ’12 to be “the same as this year, with a little more optimism.” He says his clients—the list includes Nissan, Apple, Visa, and Pepsi—view the coming year with “cautious optimism.”

“Everybody is hoping and planning for growth,” he says.

Of course, agencies can create demand for products, but if people don’t have jobs, or money to spend, those products still won’t sell. And with less demand for their goods, many marketers naturally tighten ad spending.

The good news, however, is that brands are still spending, at least for now. “It’s not like this is a robust economy. It’s not,” says Alexia Quadrani, an industry analyst at JP Morgan. “But it’s not a doomsday scenario either.”

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