Ad Spend Forecast Bleaker Still

Mar 16, 2009

A dispiriting forecast is now coming from owner-operated Worldwide Partners Inc.

By Noreen O’Leary

NEW YORK Publicly traded holding companies have good reason not to broadcast dire projections on ad spending: The worse the prognosis, the harsher the impact on the parent company’s share price. A bleaker forecast, however, is now coming from owner-operated Worldwide Partners Inc., which has released a report suggesting that current industry projections greatly underestimate the actual degree to which marketers are cutting budgets. (Download a PDF of the report.)

“We have no horse in the race. We don’t need to protect our stock price,” said Al Moffatt, CEO of WPI, whose partners handle a total of $3.9 billion in billings. “When others were projecting a 5-6 percent cut, I said the industry should expect a 15-20 percent cut in 2009 in overall U.S. ad spending and our partners agreed.”

Seventy percent of the WPI agency partner CEOs taking part in the company’s latest survey, conducted in January, said their clients would cut 2009 budgets, with over 83 percent of that global group saying those cuts were at least 15 percent. Separately, 48 percent of them said it would take at least 18 months for business conditions in their respective markets to improve.

In addition, the study confirms that an increasing number of clients are moving to  shorter billing cycles, or per-project contracts. “Anytime you have that level of cuts, you have more pay-as-you-go compensation,” said Moffatt.

Although 38 percent of global WPI member CEOs said marketers presented traditional annual budgets for 2009, a full 52 percent said their clients had put in place project-based compensation to augment or replace annual budgets.

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