What happens when Gross Domestic Product drops more than 6% in a quarter?
Advertising expenditures decline 14%.
Put the last quarter of 2008 and the first quarter of 2009 together and GDP jumped from a 4% to a 6% drop, while advertising spending went from a 4% to a 14% drop. The holiday push to clear inventory was followed by a moribund winter.
Take a close look at the figures released by TNS Media Intelligence and you see how reduced spending in key product categories has devestated certain media categories.
The outlook for the quarters ahead isn’t much better, according to the TNS experts.
The ad market declined significantly in the first quarter, overtaken by a collapsing economy which prompted consumers and marketers alike to shut their wallets and conserve,” said Jon Swallen, SVP Research at TNS Media Intelligence. “While there are hopeful signs of general economic indicators bottoming out, the advertising sector still appears to be lagging behind. Available data from second quarter shows ad expenditures tracking on a comparable plane to recent months.
The biggest declines in spending among the top 10 categories came in automotive dealers, down 49%, Retail, down 18%, direct response down 17% and financial services, down 18%.
These declines were reflected in precipitous declines in certain key media categories. Print advertising was down across the board: Magazines were off 21% versus prior year and Newspapers were off 26%.
Television was down 10%, with significant declines in spot buys and spanish language buys.
Internet display advertising was up 8% according to TNS.
What can you conclude? The drop in consumer spending has hit discretionary spending and durable goods spending the hardest. Things like home furnishing, automotive, upscale clothing and hard goods all posted big declines in the quarter. Further, local businesses across the board cut back on their marketing spend. These categories of advertising are most focused on local, in specialty media such as print and in Internet search.
Take a trillion dollars out of the economy and you’ll see advertising levels get adjusted quickly and aggressively.
I’ll reiterate my three big conclusions, which I’ve stated before and which remain consistent with the data reported:
- The current declines are resets in advertising volume, and while the media will recover with the economy, it won’t rebound to former levels;
- The declines in local, and in print, aren’t absolute referendums on the value of the product;
- But, with shifts in advertiser behavior, the categories that have been hardest hit by this slump will need to create new pricing structures and new content strategies to align their business model profitably with the new level of the economy.
