Upward Bias

Some investors worried that, with the dot-com implosion, the ad industry, which was only too happy to rake in the money from the Internet wizards and their financial backers, would hit a rough patch. Super Bowl XXXV’s telecast was as bereft of dot-com ads as XXXIV’s was full of them, yet CBS enjoyed a $200 million payday.

Interestingly, many of the ads during the big game were as ordinary or inane as in past years. The most obvious les sons: There is no shortage of companies with more mad money than common sense, and the ad industry’s rakes are still in good employ.

There is clearly an upward bias to the industry’s growth curve, and it’s part of the investment appeal of marketing-service outfits. The industry tends to walk a step faster than the national economy in the U.S. and wherever else economic development and relatively open markets are entrenched. This bias is so built into the system that it’s beyond any one company’s ability to screw up.

The evidence for this positive inclination is everywhere.

Consider the Super Bowl. This broadcast shows that “advertising” is important for many client-side companies for reasons that have nothing to do with selling products or services. Why else would it be that with so many of the spots it was impossible to determine who, if anyone, was trying to sell what, if anything, to whom?

There must be some justification for the substantial expense. Call it corporate ego or statement making, but companies sometimes feel compelled to make a splashy public appearance for little more than the sake of appearances.

While this may not be logical, it’s certainly valuable to agencies and media operators, and it happens regularly enough to be a normal part of the business. Ego-trip advertisers, rarely in short supply, are not typically price sensitive. They gotta be there.

It’s also a fact that advertising is not a zero-sum game. One agency’s account win might well be a competitor’s loss, but just as likely it’s not.

The research crew at Credit Suisse First Boston has, for the past two years, recorded every $5 million-plus account assignment they discovered. In 2000, there were almost 800 such shifts, amounting to more than $22 billion in billings.

The analysts found that 41 percent of the business wins at the nine large holding companies matched with a loss at one of the other among the nine; 12 percent were graduations up from the smaller independent shops. But nearly 47 percent of the wins, or more than $10 billion worth, came out of the blue from a client or brand new to the world.

Big accounts, such as XM Satellite Radio, with estimated ad spending of $100 million, were in this crop. So were the inevitable dot-coms, though they were typically smaller.

The point, of course, is there’s an incessant stream of new busi ness coming into the industry. It’s a by-product of the inventiveness and competitiveness of the rest of the world. The new clients that become larger and more successful will likely hire the larger and more successful marketing-service firms to design and execute their advertising, sales and PR campaigns, adding yet more fuel to the industry’s growth engine.

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