How does a shaky economy shake up advertising?
Bob_LiodiceFittingly, we tracked Association of National Advertisers CEO and driving force Bob Liodice on Madison Avenue in New York, advertising's historic home. Liodice was one of the panelists on the Advertising Week session "Advertising Week Financial Forecast."
Tim Jones of ZenithOptimedia kicked off the discussion by offering a "state of the union" for advertising in the current economic climate. The U.S. economy is sluggish, he noted, but ZenithOptimedia predicts that Internet ad spend will grow 12.6% this year, 16.2% next year and 17.3% in 2013. (You can download the report here.)
Still, the economy seems perched on the precipice of a double-dip recession. What could that portend for the advertising industry? That's why we cornered Liodice.
Yahoo! Advertising Blog: During your panel discussion, you noted that the ad mix changes as the economy changes. In what ways?
Bob Liodice: There's a greater degree of experimentation right now with marketers, because they are at a more stable point in time economically. They have a greater sense of certainty than they had in the last recession. That gives them a greater degree of flexibility to play with their advertising expenditure in areas where they had not before, and determine whether they can get greater consumer engagement with some of these new vehicles. Many in fact are finding that they do.
Seeing as the economy has somewhat stabilized, albeit of relatively low economic growth, the advertising mix is shifting into digital, social, mobile, interactive… to what's addressable. In that regard you're seeing more money coming out of newspapers, print…but, like anything, as more media comes available, more marketers are going to experiment with what works and what doesn't work. What really needs to catch up are all the measurement capabilities that will allow marketers to determine the effectiveness of those pieces of the mix.
YAB: You mentioned that we are not facing a "Lehman Brothers moment"… yet. But, we could hit some "trip wires" that might send the economy tumbling. Can you elaborate on that?
BL: What the "Lehman Brothers moment" did was that it brought into a play a tremendous level of uncertainty. Marketers don't spend when they are uncertain. At that point, the economy quickly unraveled. But at this moment we don't see the economy unraveling. One of the pieces of information you heard in the presentation is that corporate profits are at an all-time high. Unless we have a really serious blow to the economy that will put it into a double dip recession, marketers' expectations are, for the moment, that we will have modest growth in the economy and modest growth in advertising expenditures.
YAB: You also noted that we may see a "re-balance between advertising and promotion." Can you elaborate on that?
BL: I'm referring to a situation where there would be a major unraveling…what marketers typically do in such a situation, recognizing that consumers are going to be extraordinarily price conscious, is go to the quick Band-Aid, which is more promotion. That way they are more in tune with consumers to ensure that they're not over-spending. This can sometimes be damaging to brand and brand equity, because you're focusing more on price promotion than brand attributes. In times that are tough, consumers can still get their products even if they're more generic, but that tends to take the luster off brands. So in tough times you see a balance toward price promotion more than [brand] advertising, but on the rebound you see the mix going back to more traditional levels.
YAB: B2B businesses are very socially oriented these days but, you said, a downturn could change that. Can you explain?
BL: I'm saying that the B2B community is relying very heavily on social media. Think about the old B2B days when you had crusty old print ads that you kind of laughed at. B2B marketers have moved very aggressively on the social front. A lot of them have LinkedIn-type connections and are connected to their respective customers. But again, in an uncertain environment, since a big chunk of their spending is already social media-based, that could naturally come down.
--- Michael Mattis
