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Upturn in Account Spending May Come Later Rather Than Sooner

The current steep decline in advertising spending will begin to reverse itself later than had been expected, several leading marketers and agency media executives predicted yesterday, partly because of the effects of the terrorist attacks and partly because of the softness in the economy before Sept. 11.

The attacks did not affect the advertising economy so much as they "affected the brains, the heart, the psychology" of decision makers in the industry, said Jon Mandel, co- managing director at MediaCom Worldwide in New York, a media services agency that is owned by the Grey Global Group.

"We had been projecting the falloff in advertising would run until somewhere between May and July 2002," he added, but it is now possible "the upturn may be pushed to winter 2003."

Mr. Mandel was among the executives offering their forecasts and opinions at a panel during a general session of the 2001 American Magazine Conference at the Sheraton Hotel and Towers in Midtown Manhattan.

Through the first six months of 2001, the latest period for which data is available from CMR, a unit of Taylor Nelson Sofres, American ad spending fell 6.4 percent from the first half of 2000.

That decline continued through the third quarter, as evidenced by reports last week from the Wall Street analysts following Madison Avenue, who reduced their estimates for third-quarter earnings for the largest agency companies like the Interpublic Group of Companies, the Omnicom Group and the WPP Group.

"Let's face it, business was lousy on Sept. 10," said David Verklin, chief executive at the Carat North America division of Carat in New York, the media services agency owned by the Aegis Group.

"Clients are not looking for a reason to spend money," he added. "They're looking for reasons not to spend money."

The process of what Mr. Verklin called "de-selection" will probably extend through 2002, he said, as ad spending declines by 5 percent to 5.5 percent from whatever the final figure is for 2001.

Next year "will be very difficult," Mr. Verklin said, "with July the earliest time we see a pickup."

"Some sectors will be particularly badly hurt," he predicted, including travel, financial services, business- to-business and technology.

One marketer panelist underscored that forecast.

"Financial service companies are hurting, all the major firms, including my firm," said Frederick W. Hill, executive vice president for marketing communications at J. P. Morgan Chase & Company in New York.

As a result, he added, for 2001 and "well into 2002, our ad dollars will be curtailed substantially, compared with levels three, four years ago."

Mr. Hill echoed Mr. Mandel by predicting a turnaround "beyond 2002," but offered these encouraging words to the sellers of ad space in the audience: "You have an opportunity, to come to us with creative ideas on how to gain market share, increase sales, in a recession. If you come with ideas other than just increasing your ad pages, we'll listen."

Another advertiser, Jeffrey A. Bell, vice president for marketing communications at the Chrysler Group in Auburn Hills, Mich., forecast that this quarter, as well as the first two quarters of 2002, "will be very painful."

One reason, said Mr. Bell, whose company is part of DaimlerChrysler, is that after the attacks many marketers "are starting to make the difficult decisions they had hoped they would not have to make," which include "filing for Chapter 11, downsizing and layoffs."

The campaigns that the Chrysler Group has run after Sept. 11 are being reshaped, he added, to emphasize "core values" for each brand that may resonate more strongly now, like "safety, security, resilience."

One factor complicating the forecasting for 2002, according to another marketer, is the increasingly shorter lead times for making ad- spending decisions.

Such decisions are being delayed "to an extraordinary degree," said Peggy Kelly, vice president for advertising services at the global marketing services group at Bristol-Myers Squibb in New York. "We're doing it absolutely as late as we can."

The events after the terrorist attacks have only increased the "incredible need all advertisers feel for flexibility," she added. The sitution is manifesting itself, she said, in the way they "need to commit at the last possible moment" as well as in the way "they need to get out of commitments."

Another problem in making predictions, Ms. Kelly said, is the fact "the economy in general is looking like a deflationary economy instead of an inflationary economy," a change that is spreading beyond consumer product categories like computers.

"It's tough to think how to reconfigure your business if you have to show growth every year in a deflationary economy," she added.

The conference, sponsored by the Magazine Publishers of America and the American Society of Magazine Editors, continues through today at the Sheraton. About 550 people are attending the conference, which was moved from Phoenix because of a reluctance many potential attendees expressed about traveling outside New York at this time.

The organizers are taking advantage of the new location the first time the conference has ever been held in New York to help city officials with efforts to spur a recovery from the attacks. Mayor Rudolph W. Giuliani spoke at the opening session on Sunday night, along with the two mayoral candidates, Michael R. Bloomberg and Mark Green.

Kits distributed to those who attended included discount certificates for purchases at Bloomingdale's as well as for tickets to "Kiss Me, Kate."

Kiss, schmiss, what about buying some ad pages?


By STUART ELLIOTT, The New York Times October 23, 2001

Copyright © 2001 The New York Times Company. All rights reserved.