Afternoon:
9°c
A new year always offers the possibility of new hope. Surely, after the worst 12 months for the media in modern history, things can only get better in 2010. The recession will recede. Confidence will return. Advertising will pick up.
If only that were to be the case. Most forecasts suggest otherwise and, in taking counsel from some of the wisest of advertising gurus, there appears to be little chance of a concerted upswing.
There may be some light filtering through, but before we reach it, we must travel down a gloomy tunnel. Predictions are not facts, of course. But there is more than a measure of unanimity among forecasters. Taken together, they look very pessimistic indeed.
GroupM, for example, predicts that there will be zero growth in ad spend this year over last. Its ultimate boss, WPP's Sir Martin Sorrell, tells me that this represents somewhat of a turnaround in fortunes.
“Flat is the new up,” he says grimly. “Advertising is likely to do better than last year, but that isn't saying much. It's a less worse' scenario.”
GroupM's futures director, Adam Smith, recently suggested that there was anecdotal evidence of improving confidence, which might just revive marketing investment, but then qualified this by adding: “It cannot make any easier the fiscal and household consolidation which lies ahead ... We still have most media types negative on revenue in 2010.”
Figures produced by Enders Analysis are even more negative. Its forecast for this year suggests that the overall press ad spend will fall by 8.4 per cent compared to 2009 while television drops by 4 per cent. Like GroupM, it does believe there will be an improvement in internet spending, but this will not offset the general decline.
Both Sorrell and Claire Enders, who runs consultancy Enders Analysis, point to looming problems that the British economy faces after the election. For example, the removal of fiscal stimuli, such as quantitative easing and the car scrappage scheme, are very likely to have a negative impact. On car scrappage, Sorrell points to the US precedent: “When cash for clunkers' was withdrawn, the American auto market shrank from 14 million units to 10 million.”
He and Enders agree that the Government will do nothing this side of the election about the underlying and grave problem of debt.
After the poll, whoever gets elected, the incoming government will have to face up to the reality. “Uncertainty over the UK's indebtedness is so great,” says Enders. “Even if things feel relatively buoyant now, economic realities at the back part of the year could be hard to deal with. We'll be living minute by minute.”
The greatest fear would be of a double-dip recession, which, not surprisingly, would have a further disastrous effect on advertising. Enders's colleague, Douglas McCabe, agrees. “It's going to be pretty tricky,” he says. But he believes, whatever the outcome of the election, that there is likely to be a further decline in spending on TV and newspaper advertising.
Sorrell, as head of one the world's largest advertising companies, is able to see matters in a global perspective. While there are clearer signs of an ad revival in the US compared to Britain, the UK is not in as parlous a state as Spain and Germany, nor the slightly better-performing France and Italy.
I guess that's what he means when saying that “we are looking for straws in the wind”. The comparison with other European countries is largely irrelevant to British-based traditional media companies that have been suffering for more than two years.
So where is that light? Well, Simon Davis, managing director of Walker Media, part of the M&C Saatchi group, is altogether more positive about prospects for the coming year. He says: “We've seen automotive spend improve in this quarter because the car companies just couldn't hold back any longer on their launches. Look at Vauxhall, for instance. And that's not all. Things are looking rosier for retailers too.”
Using 2007 as a benchmark “because of its semi-normality” after the past two gloomy years, he argues that there are reasons to be cheerful. Advertisers are moving back into television, he claims, because it's now cheaper to buy time than at any period since 1995. Strong programming on ITV has also attracted media buyers.
By contrast, radio companies' incomes have been hit by a withdrawal of Central Office of Information advertising, says Enders.
This may well get worse should the Conservatives win the election. The party has threatened to take a scythe to the CoI's ad spending.
But let's offer another ray of (possible) sunshine. This is the year of the World Cup, starting on 11 June for a month. Though football pundits may well have a brutally realistic view England's chances, it will be a time, at least before a ball is kicked, of national optimism. Advertisers are sure to pick up on that.
Anyway, such is the hoopla that always surrounds the event it is sure to galvanise people across Britain, even the non-English elements. A mood change with, perhaps, a new government in power, could help to build the confidence of public that has chosen to save rather than consume in the past six months.
Claire Beale, the editor of Campaign, the advertising industry's trade magazine, believes consumers “will be dictating the rules of the marketing game” this year.
She wrote the other day: “How freely consumers open their purses over the coming year will have a profound effect on the shape of the advertising and marketing industries for years to come.” Beale cited research by Mintel that reveals just how nervous and risk-averse consumers have become.
Advertisers have to find a way of unlocking purses and wallets. Could Wayne Rooney and his team-mates perform that trick, I wonder?
