It’s hard to avoid talk of recession these days. Although no one agrees when exactly a recession will hit or how dramatic the fallout will be, many market observers are eyeing key economic health indicators with concern. The simple fact is this: We live in a cyclical economy, and recessions are a part of the natural order. As we creep closer to the inevitable downcycle, now is the time to start considering the likely impact on the advertising marketplace.
The repercussions of the recession in the advertising industry are the direct result of how advertisers behave when the market is operating under so-called “normal conditions.” In this regard, marketers are a hesitant bunch. As much as we like to speak of continual innovation within the Marketing space, seismic changes in media allocations are rare under normal market conditions. “Strategic shifts” in spend typically represent one or two percentage points here and there—ultimately resulting in a fairly slow and tactical redistribution of the media mix.
How this behavior plays out over time is important. The advertising industry’s glacial pace of redistribution leads to a serious build-up of potential movement. Think of it like land masses moving past one another: When they get stuck, the pressure will build until a breaking point is reached. And that’s when an earthquake occurs.
When Market Earthquakes Hit
In the advertising marketplace, there are no natural earthquakes. They only occur when broader economic forces are brought to bear, such as the dot-com bubble burst 20 years ago and the housing market disaster that led into the Great Recession a decade ago. It is only in such broader economic crises that marketers are pressed in a way that forces them to make significant changes to “business as usual.”
To learn from history as we prepare for a new downturn, we have but to look at the print advertising industry pre- and post-Great Recession. While all Marketing channels felt the pinch of short-term brand belt-tightening, it was the newspaper and magazine industries, which lost about 25 percent of their ad revenues in a single year, that were absolutely decimated following the housing market crash in 2008.
But here’s the thing: It’s not that the print industry just happened to draw the short straw in the Great Recession. Rather, the Great Recession prompted a dramatic and sudden right-sizing in print advertising—one that finally brought it into line with consumer media usage behaviors. Advertisers had already been shifting away from print at their standard metered pace, slowly moving greater spend to digital channels. The Great Recession gave advertisers the shove needed to finally get where they needed to go. In other words, it forced a correction—and we can expect to see a similar correction take place during the next downturn.
Where to Expect a Right-Sizing
To this day, a decade after the Great Recession hit, print advertising spend continues to wane as digital investments grow as an impressive clip. So where will the long-term media mix shift occur in the next recession? This time around, all eyes should be on the TV and video markets.
The effects of the coming downturn won’t be evident in the aggregate TV and Video market, but rather within the TV and Video market. After all, it’s the investment distribution within this category—not in the overall category itself—that is in serious need of a right-sizing.
The biggest hits will be seen within daytime TV and in cable channels that don’t have broader digital distribution channels in place. These are the areas—ones heavily reliant on linear distribution and syndicated, library content—where advertisers have been making their glacial withdrawals in recent years, but it hasn’t been fast enough to keep pace with trends in consumer media usage.
They’re Now Publishers
Unlike the Great Recession and the print industry decline, TV and Video today are already aligned to the concept and practice of Video publishing – which is agnostic to platform. TV and Video companies have been preparing for a 5G world of Video content wherever and whenever it appeals to a consumer. Marketers may move money digitally, but much of it will simply be redistributed within the same media content provider, a.k.a. Video publisher.
The Aftermath of a (Potential) Recession
In the immediate aftermath of a recession, we’ll see cutbacks across the Advertising landscape, but the deepest cuts will hit legacy TV channels. Tentpole programming around sports and major events will be far less affected, as will investment in emerging digital programming channels. As budgets bounce back, dollars formerly spent on daytime and linear cable programming will flow into emerging convergent TV opportunities, as well as digital video.
Of course, as with any shift in the advertising market, early movers will emerge stronger on the other side of the recession. As we move into the final days of our unprecedented boom economy, you can be preparing in the following ways:
- Be honest about the “good times.” Have you really altered your media mix in proportion to consumer trends (and inventory availability)?
- Begin scenario planning for 50 percent budget levels. What does your agency say you can afford? Even if you don’t cut during the recession, this exercise will show you where your mix actually needs to be.
- Identify core content to support, even if it’s highly-priced. Avoid degrading your mix to cheaper alternatives. Less can truly be more.
- Keep an eye on your share of Voice. Competitors will have prepared for a recession, and some might even increase budgets when the recession hits to gain market share. Are you ready to compete?
- If possible, prepare to either hold or increase your budgets while others cut. Your share of voice will grow, which can limit sales losses. And your brand will emerge stronger on the other side.
Economic recessions always prompt short-term budgetary concerns among brands, but these concerns—by definition—do not last long. However, the step change that occurs in media mixes when recessions hit are anything but cyclical. Why wait and react when the market forces your hand? Rethinking your investment distribution now will give you a leg up on your competitors when the looming economic earthquake rocks the advertising industry yet again.