Big marketers from Procter & Gamble to General Motors are hitting the brakes on media spending for the second quarter.
They are canceling up to 20% of national TV ad buys, or moving marketing bucks into less expensive mediums.
"We're seeing plenty of advertisers cutting back. They're deeper cuts than we've ever seen," reports Dan Rank, managing partner of media buyer OMD.
Tim Spengler of Initiative Media, Los Angeles, predicts current ad woes will spark the first drop in a decade for TV's "upfront" market, the buying frenzy each May in which TV networks sell 70% of their commercial inventory for the coming season. "We're reluctant to call this a recession; maybe a correction," says Spengler.
Call it what you want. But don't blame the slowdown on dot-com woes. Advertisers having second thoughts about the second quarter include the biggest spenders on Madison Avenue:
P&G, until recently the top U.S. advertiser, confirms slashing ad budgets. "We have taken some cuts for our April-May-June quarter," says spokesman Tom Milliken. "However, we'll continue to invest in our established brands."
GM, now the top ad buyer, is canceling about half of the second-quarter network TV it bought in last year's upfront market, as much as $100 million worth, say media buyers who know of the plans. GM spokeswoman Peg Holmes would only say, "We have made some reductions in our second-quarter national TV budget. As you get closer to the quarter, you reassess everything and fine-tune your needs." She adds, "We expect our total 2001 ad spending to remain about the same as last year."
Troubled DaimlerChrysler is expected to cut ad spending as part of its overall cost cutting. In her report "Auto Ads Out of Gas," Merrill Lynch media analyst Jessica Reif Cohen says: "With DaimlerChrysler's cost-reduction program, we expect it to exercise upfront advertising cancellations and to reduce national spot outlays in TV and radio."
Ford has not cut its budget but is "moving media around" to stretch the dollars with new initiatives including Web and grassroots marketing, says Julie Roehm, car marketing manager for Ford division. "There's a broader mix of how we spend our money." A retreat by rivals could be an opening for Ford. "We don't see this as a panic year; we see it as an opportunity year," Roehm says.
Toyota, Ford and Chrysler terrified TV executives at a recent industry conference by declaring they won't honor ad rate increases in 2001. Networks that do it get dropped, they warned. Chrysler played similar hardball with magazines last year.
Forecaster Jack Myers of Myers Reports predicts ad spending will rebound by the fourth quarter. He blames the press for fanning recession flames: "Much of the consternation and fear of a sustained recession in the media industry is the result of overly aggressive and misinformed press reports."
Michael McCarthy, USA TODAY. February 23, 2001
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