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Ad industry looks to a slow recession ascent


NEW YORK -- Here's the good news about the worst advertising recession since World War II: It has bottomed out.

But don't expect things to pick up as quickly as they hit bottom.

Two leading advertising industry forecasters presenting Monday at the annual UBS Warburg Media Week Conference in New York predicted a slow recovery in 2002, stunted in part by the Sept. 11 attacks, with a return to a more robust advertising picture in 2003.

The presentations--by Robert J. Coen, senior vice president, director of forecasting, for Universal McCann, and John Perriss, chief executive of Zenith Optimedia Group--provide a cautionary note for those expecting a notable recovery in the broader economy next year. Advertising typically feels the effects of a downturn--and a subsequent recovery--earlier than other sectors, or so the industry believes.

That 2002 is shaping up to improve modestly at best--even though it is an Olympic and congressional election year, traditionally a boon for advertising--suggests the effects of the recession may linger.

"We're starting with a slower pace of return than the last recession," said Coen, who is predicting U.S. ad spending will drop 4.1 percent this year, to roughly $233.7 billion from $243.7 billion in 2000. He sees a modest 2.4 percent gain, to $239.3 billion, in 2002.

Worldwide, Perriss is predicting a 3.4 percent decline in advertising this year, to $316.4 billion, and only a 0.8 percent gain next year, to $318.8 billion.

"The landing was far from soft," Perriss said. "But we think we're at the bottom of the cycle."

Perriss said many were caught off guard by the steep declines in corporate profits this year, and cuts in ad budgets overcompensated as a short-term fix. He predicted future downturns also will include this rapid pullout from advertising as pressure on short-term profitability remains.

Meanwhile, some on Madison Avenue are even less optimistic. Martin Sorrell, CEO of WPP Group--which includes advertising agencies J. Walter Thompson, Ogilvy & Mather and Young & Rubicam--said he's still waiting to see signs of life from client budgets that would suggest a major turnaround is under way.

In all, it was a sobering day for the U.S. advertising industry, which saw predictions of 5 percent gains in advertising last December melt into declines not seen since World War II.

Perriss said that expenditures from the top 10 advertisers fell 9 percent in 2001, illustrating how weak the ad market had become. The drop was led by General Motors, which, through July, spent 24 percent less than last year.

As such, both forecasters said advertisers were able to find bargains in 2001--something at least one media executive said wouldn't necessarily happen in 2002. "We've sent the word out that it is totally unacceptable to sell advertising in 2002 at lower prices than in 2001," Mel Karmazin, president of Viacom Inc., said during the conference. Karmazin tried to hold the line on prices during sales before the TV season this year, but finally had to discount inventory after it became clear how weak the market had become.

MB Financial's new name: MB Financial Bank N.A., the new identity for the combined operations of Manufacturers Bank and MidCity Bank and their subsidiaries, launches its first campaign Tuesday under the new name. With the tagline "Experience. The Difference," the campaign is designed to roll out the new name for the bank's 31 locations in the area--including the First National Bank of Elmhurst, First National Bank of Morton Grove and First Savings of South Holland. The bank is expected to spend roughly $2 million to $3 million in local media behind the campaign developed by Chicago-based Grady, Campbell. ITQ/Minkus & Dunne Communications is handling public relations.

Racing deal for Levy: Chicago-based Levy Restaurants and Compass Group on Monday said they had signed a 20-year, $800 million food service contract with Speedway Motorsports Inc. The deal, according to Andy Lansing, president of Levy, means that Levy will take over food operations at six major auto racetracks, including Atlanta Motor Speedway, as well as four minor league ballparks. Service will begin in the summer.

On the move: Diane Salucci, director of corporate communications and investor relations at DeVry Inc., moves to Scottsdale, Ariz.-based eFunds Corp. as vice president of corporate communications and investor relations. ... McDonald's named Russ Smyth president of partner brands division, which includes restaurant concepts McDonald's has acquired or invested in.

 

Jim Kirk, The Chicago Tribune December 4, 2001

Copyright © 2001 Chicago Tribune. All rights reserved.