2011 Advertising Growth Sustained by Shift from Promotional Spending

National Broadcast TV Syndication Poised for Strong Upfront Market

The sustained growth of the 2011 television, radio, out-of-home and digital media advertising economy is unprecedented. Historically, advertising has been a lagging economic indicator, following the general economy and gross national product by an average six months. But economists and forecasters have separated advertising from marketers' promotional spending on trade allowances, coupons, incentives, contests and sweepstakes, and event marketing. These "below-the-line" investments often ran counter to advertising spending. In difficult economic times, promotion went up while advertising went down. This trend is reversing itself. In the past several months, according to proprietary market intelligence gathered by Jack MyersMedia Business Report, marketers have been reducing their promotional investments, especially coupon distribution through traditional free-standing-inserts, and shifting the budgets into advertising. A small but growing reason for this is the availability of Facebook, Groupon, Living Social and other digital media that offer far more economical options and free up budgets for brand advertising.

Totalmarketing expenditures in the 55 categories tracked by Jack MyersMedia Business Report are forecast to grow less than 2.0% in 2011. With consumers spending more for gasoline, clothing and basic grocery supplies due to rising oil and commodity prices, historic trends would suggest marketers would shift budgets away from brand advertising and into retail trade and consumer sales promotion. But historic patterns no longer hold, as marketers have become increasingly reliant on aggressive brand messaging married with online social marketing and commerce investments. As one industry executive recently told me, "When you don't advertise you don't make sales. When you don't make sales you don't impress Wall Street. I'm not glossing over the higher oil costs, but five years ago, this economy would have caused panic among advertisers and the network TV inventory sell-off would have been massive. Advertisers are not pulling back the way they would have in the past."

Although there are worrying indicators, the remainder of 2011 should prove to be positive for legacy media, digital media and advertising agencies. It will be less than positive for traditional trade and consumer promotion companies and for the retailers who are dependent on trade allowances paid to them by major marketers.

A typically unheralded media category that is poised for growth in 2011 and 2012 is national broadcast television syndication, which is a beneficiary of the higher costs being forecast for the broadcast and cable network Upfront. TV Syndication companies 20^th Television, CBS Television Distribution, Disney/ABC Domestic Television and Warner Bros Domestic TV are all ranked among the top 10 national TV sales organizations (among 48) for delivering "Value for the Investment" in the soon-to-be-released Annual Myers Survey of Advertising Executives on National Television Sales Organization Performance.

In presentations to advertisers, Warner Bros executives are pitching syndication as "the best of TV on your terms." The presentation, according to those who have seen it, points out that advertisers can select specific dayparts and programs, can target popular primetime series while avoiding the pitfalls of heavy DVR recording, cancelled series and unstable ratings. Agency buyers can target specific demographics, maintain consistent year-round programming and ratings, and achieve cost efficiencies in appealing content environments.

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