Ad sector fears slowdown may spiral into recession

The Irish advertising industry is bracing itself for a difficult last quarter due to the events in New York and Washington and continuing global uncertainty.

The last quarter is traditionally the time when a third of advertising budgets are spent.

As one senior executive put it: "We're floundering in the dark, nobody is in a position to call it." But the market is calling it worldwide amid fears that last week's attacks will trigger a recession in a sector already experiencing a significant global downturn.

Shares in Granada and Carlton Communications fell by 9 per cent and 13 per cent respectively at the start of the week in anticipation of a further drop in advertising revenue for ITV. When the New York Stock Exchange re-opened this week, shares in the US's biggest advertising groups - all of which have a presence here - fell sharply. Interpublic, the world's biggest advertising group and owner of McCann Erickson and Lowe Lintas, fell by 13 per cent, Omnicom fell 7 per cent and Grey 3 per cent.

Advertisers and agencies here reacted quickly last week, pulling existing campaigns and delaying the start of others. Media owners withdrew advertising to free up editorial space and also because some ads might appear insensitive.

Airline advertising and travel- related campaigns were the first to be pulled. Ads that were temporarily pulled by RT╔ included Red Bull's "give you wings" campaign; a radio ad for McDonald's in which a meteor hits New York; a Weetabix ad where a building is flattened and an ad for herbal drink Kombucha because it showed the twin towers of the World Trade Centre in the background. US multinationals such as Proctor & Gamble pulled their advertising as a matter of course.

A week later, media schedules are back on track and advertisers whose ads might have been insensitive are having them replaced. Some ads will be shelved for good, such as the Esat ad where the young man manages to plunge a city into darkness by pressing the wrong lever. It ends with a shot of Liberty Hall being blown up.

Some sectors, however, will clearly not be coming back in the short term. It is thought that airline campaigns promoting international travel will not be back in significant volume until the second quarter of 2002, although local advertising for the Irish travel industry should grow over the coming months as hotels attempt to fill beds that would normally be taken up by international travellers.

Two days ago, Merrill Lynch struck an optimistic note when it predicted that the effect would be short-term with the cancellation or delaying of campaigns continuing through September right into October. How the advertising industry finishes out the last quarter will, according to Merrill Lynch, depend entirely on consumer confidence and spending in the US.

Strong Irish consumer confidence has been partly responsible for keeping Irish advertising buoyant throughout 2001. Until the terrorist attacks in the US it was predicted that the industry here would buck international trends and grow this year by 7-8 per cent. It was also felt that while client budgets in 2002 would not grow significantly, they would not be cut either. But 8 per cent now looks optimistic, although to what extent will not be clear until advertisers get a feel for consumer confidence.

RTE is to replace the pre-empt system of airtime buying with a deal-based system. It is thought the changeover could happen as early as January 2002.

The pre-empt system works by selling an individual advertising slot to the highest bidder - frequently on the day of transmission. A deal-based system is more straightforward. Advertisers buy a package of slots for which the broadcaster guarantees a particular audience.

The deal-based system will have staffing implications for both agencies and RT╔ as the pre-empt system demands daily, even hourly communication, between the two. It could also have implications for Irish media planners and agencies because ad time can be bought by a centralised buying agency in London, bypassing the need for a Dublin operation.

bharrison@irish-times.ie