Ad Spending cut by 50 %

One of the worst global meltdowns in recent history is expected to immediately shortcircuit the advertising sector, as corporates continue to tighten their belt. The reverberating shockwaves have started making their presence felt, and corporates have cut back on their advertising and marketing spends, in some cases by almost 50%.
    While some advertising stalwarts insist it is too early to be overly concerned, others maintain that a recovery of the US economy should be under way mid next year or the advertising market could run out of gas.
“We believe structural headwinds (like fragmentation) remain as real in India as they are globally. The disconnect between the underlying economy and the ad market cannot continue indefinitely,’’ says Nakul Chopra, CEO, Publicis South Asia.
    “In the end,’’ he adds, “the whole marketing business is about funds and optimism. Corporates will hunker down for a brief period. Already, big clients have cut back their marketing spends by fairly large amounts in the US and Europe this year. This is bound to have a cascading effect in India.’’
    Adds ad guru Prahlad Kakkar, “Big financial brands going bellyup is bound to have a knock-on effect on consumer confidence and spending. Corporates have already cut down 50% of their ad spend, due to the oil crisis. The total advertising spend by major corporates is 6% of turnover. If inflation is 13%, where does that leave advertising?’’
    Maintaining that the economy has witnessed rising public spending and house prices, financial and business services, Kakkar adds, “Just as the boom has had a disproportionate effect on the economy, its suffering will have a similarly large impact.’’
    Executive chairman of O&M, Piyush Pandey, however, says, “We will have to wait for more from the markets before we start hitting the panic button. Corporates in India will definitely feel that US ripples, but it will reach them slowly. I don’t see any immediate impact. It all depends on how you play the game. One does need to be cautious though.’’