Decline in adspend, what does it mean?

Goldman Sachs, the US investment bank has reported a return to profit for the first quarter of 2009. JPMorgan, Chase and Citigroup have all followed suit. Indications are that although not over the banking crisis is settling.

This is in stark contrast to the marketing sector, where all indications are that recession continues to bite. The Bellwether report from earlier this year suggested that 45% of companies were reducing their marketing budgets for 2009. The report also suggested that online adspend had already dropped 7% and was set to drop further.

Before we panic, it is important to put this decline into context.

In previous downturns marketing money was always drawn back to TV. Brand Directors felt safe and secure with the old idiom ‘no-one was ever fired by investing marketing money on telly’.

The present climate is different; TV was in terminal decline before we entered the recession. Some TV companies have at times successfully sought to find alternative income streams. However, those like ITV that still rely purely on advertising are being hit very hard, you need only to look at their share price.

As we move through 2009, what is interesting is the decline in online ad spend. Predictions from 2008 were for digital to increase and at worse stagnate. This has not happened and we are seeing a real drop in spending.

A recent headline for Volvo on NMA.co.uk 30/10 indicated that Volvo was restructuring its marketing department to focus on digital. In itself there is nothing of great interest in this as many brands have made the very same statement.

What is interesting is that Volvo is focusing on ‘Natural Search’ and ‘Social Media’. Natural Search was seen as part of the dark art of SEO. However, today anyone with access to a ‘Google Analytics’ account can get insights into how to optimise their website easily, simply and for free.

Social Media has created opportunities for brands to open direct dialogue with their consumers for little or no cost. 2008 saw an explosion in social media sites and brands that are clever have been able to harness this power.

I suspect that Volvo is one of a growing number of brands that are directing their marketing focus to these areas; they are investing more time, effort and giving it more focus. What they are not doing is investing more money; in fact they are investing less.

The nature of these techniques, if done well provide opportunities for brands to have the same if not greater impact for far less investment.

Looking back at the headlines, spend on digital is down. However, rather than indicating a deeper downturn, this may well be due to clients being bright and investing more time and less money to achieve a better result.