Will Marketing, Advertising Continue to Fall Together?

If you want to know what the current economy holds in store for the advertising industry, you might consider what happened after Galileo made his famous climb to the top of the Leaning Tower of Pisa in 1590. Dropping two cannonballs of unequal weight, the scientist proved that gravity exercises the same effect on everything. Hence, a modern corollary for marketers: When the economy takes a fall, advertising tends to fall right along beside it.

That’s what happened during the last recession back in 2001 when, according to Nielsen Media Research (Brandweek is a Nielsen property), global ad spending fell 5 percent. Now, seven years later, despite ad bonanzas like the Olympics and the Presidential race, the sputtering of the country’s economic engine are already sending tremors through the ad industry. For the first quarter of this year, spending declined 1.4 percent, per Nielsen. Considering that 2009 will be a year without a White House race or an Olympiad, it’s no surprise that many are predicting a dismal time of things.

Even so, no one knows for certain how 2009 will play out. The current circumstances of the economy—including a $700 billion bailout of the financial industry and the possible bankruptcies of one or more of the Big Three U.S. automakers—have led many to believe that the next recession will be a particularly deep and long one.

At the same time, there are patterns that emerged in the ad industry during the recent economic downturns showing that some of the worst assumptions of ad industry execs may be unfounded. In short, while ad agencies are likely to lose business in 2009, if things play out as they did during the last recession, those agencies are less likely to lose accounts. If you’re a CMO, though, you may have some reason to worry. Few enjoy solid job security during recessions; CMOs in particular.

LESS BUSINESS, BUT LESS TURNOVER

When the economy tanks, many companies go into soul-searching mode, but does that mean they also go into ad shop-searching mode? Not necessarily. Although it’s logical to assume that, as sales falter, marketers will begin making changes for changes’ sake, executives who run advertising search firms say that, if anything, ad-search activity slows down during a recession. The reason? Such searches can be expensive, and companies often find their energies are better spent looking at other aspects of the business. Though no one keeps figures on the exact amount of ad searches, experts say usually down times mean fewer of them.

“When we had the difficult economic times after the dot-com bust and after 9/11 in 2003 and 2004, which were probably the worst economic times for the industry, people stopped running reviews,” said Judy Neer, president of Pile & Co., a Boston-based search firm. Neer, however, added that there have been a lot of reviews lately, but “these reviews are not about ‘The times are dire, we’ve got to find a new agency,'” she said. “The dire times aren’t impacting the decision.” Instead, Neer said, the reviews are driven by brands entering new markets.

Though Neer didn’t cite examples, some recent searches both underscore and contradict her point. Pepsi’s decision to part with 48-year partner BBDO last week, for instance, was driven by lagging sales, new management and a score of new initiatives set for 2009. Similarly, a shootout over Nokia was driven by that company’s looming launch of its Nseries smart phone.

Meanwhile, Outback Steakhouse’s decision to hand its $80 million account over to Lowe, New York, may have been driven by a slowness in the casual-dining segment. (Dan Dillon, Outback’s vp of marketing, declined comment on the issue.)