Advertising spending to fall sharply as slowdown hits

Advertising spending is predicted to experience a dramatic slowdown in 2009, due to uncertain economic conditions and lower business and consumer confidence.

Advertising spending is predicted to experience a dramatic slowdown in 2009, due to uncertain economic conditions and lower business and consumer confidence.

The news is a disappointment for media companies in the $12 billion market, which is expected to see growth slow sharply from a steady 13% in 2007 to 6% this year.

Projections for 2009 are worse, with media agency OMD predicting growth will slide to 4.7% in 2009, while Zenith Optimedia estimates a fall to 4.2% and JP Morgan approximates a drop to 2%.

Peter Cox, independent media analyst for Cox & Co, says the state of the advertising market is tied to the economy’s health, and spending will tend to reflect that.

“The fact is that advertising is highly reactive to the state of the economy,” he says. “In a down period, it’s easier to cut back on advertising than it is to cut back on other expenses. You don’t have to fire people; you just take it out of the advertising budget.”

Even the fastest-growing category of recent years, internet advertising, will see its growth rate slow from 34.5% in 2007 to 23.5% in 2008, with a prediction of just 17.4% in 2009, according to OMD.

But Cox says the growth decline shouldn’t necessarily indicate panic across the industry, as these figures are still respectable numbers.

“Some of the areas are being a bit more resilient, such as publishing. But I still reckon I’ve seen more change in the last two years than the last 30. This really has been a very incredibly fast changing marketplace,” Cox says.

“I think it depends on what happens to the Australian economy. We’ve been pretty protected against the rest of the world; I think it depends on how you view the future. But if those things keep on going, our advertising will be hit hard,” Cox says.

But the industry is still being hit hard. A survey published by the Association of National Advertisers in the United States found over half of those surveyed expected to cut budgets, while 61% of those planned to cancel or delay current projects.

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