Dollars & Sense
2K10, What's Ahead
01/06/2010 - It is the season of annual predictions and forecasts. Of course, I can't help myself in wanting to also throw my two cents into the mix. However, it really is somewhat silly as we truly don't know what the future holds and can only use the recent past for clues. Even if it may not all be pretty, here goes anyway.
Macroeconomics
Let me first start at a high, macroeconomic level because more so than in any recent years I really think 2010 for the Yellow Pages industry is going to be driven by one key thing -- the economy.
We appear to be in the midst of some type of recovery although it is not clear if it is going to be a U-shaped or V-shaped recovery. At best I think this is going to be slow uneven recovery ahead, as there are signals we are still in for a bumpy ride.
Unemployment: glimmers of hope?
Some of the leading employment indicators have been signaling improvements of late. For instance, layoff announcements and initial unemployment claims are down, temporary employment hiring was up, the number of manufacturing hours worked increased, and overtime hours continued to rise. Inventories have been depleted and so many workers have been laid off last year that for many businesses there's really only one direction to go-up, and that's going mean hiring more people at some point.
Consumers: shaken but there is always tomorrow
Two of the most closely followed consumer sentiment surveys, the Conference Board Survey and the University of Michigan Consumer Sentiment Survey, recently showed that consumers are still not feeling good about their current financial positions, have concerns about their jobs, and have low expectations for their income. But they were more positive about their future financial conditions, expecting business and employment conditions to improve over the next 6-12 months-another sign that the worst may be behind us.
Spending: wallets still opening slowly
If you watched consumer behavior during this recession, you would have seen an unusually trend -- overall consumers increased their savings and paid down debt at the fastest rate in recorded history. That is not a trend that advertising businesses want to hear about. There's still a strong unwillingness to "spend on things you don't necessarily need." But you can only go so long before the natural replacement cycle within consumer spending will kick in. I'm not suggesting the flood gates will come flying open. But you can only replace/fix some things for so long.
Washington: spending like mad
You all know about the discussions (or should I say arguments?) going on at the Federal government level about health care, cap-n-trade, and runaway entitlement programs will undoubtedly result in more government debt, increased taxes, and additional regulations. Perhaps the most sobering summary was the one from Chief Executive magazine publisher J. P. Donlan who noted in his Editor Comments in the November/December issue that the debt level from just the “economic stimulus” package alone (which no one in this industry received anything from) will cost every US citizen $280 a month, for the rest of our lives. This unchecked level of government spending has to hurt any recovery.
Advertising:
Peaking back, depending on which media forecast you look at, U.S. advertising spending in 2009 declined for the second or third year in a row. But the bottom line is brutally clear: 2009 saw the sharpest percentage decline in overall ad spending since the Great Depression. U.S. measured-media ad spending plunged 14.7% in the first nine months of 2009 (according to WPP's TNS Media Intelligence). TNS said the nation's 100 largest advertisers cut measured-media spending by 7.9% in the first three quarters. But the cuts weren't just at the national level, as local advertising as went into a similar freefall.
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Includes TV, radio, newspaper, magazine, internet, out of home. Magna and Zenith include cinema. TNS internet spending excludes search and broadband video. TNS '09 is for first 9 months. For future-year forecasts (2010 and beyond), Group M and ZenithOptimedia assume constant foreign-exchange rates and employ inflation predictions from independent sources; Magna's figures are based on its forecast of media firms' ad revenues in nominal dollars, including the effects of changes in exchange rates and inflation. Source: December 2009 media-agency forecasts; TNS Media Intelligence. |
While some prognosticators say the ad market will begin to stabilize next year, ad executives aren't celebrating yet. The business typically lags behind a recovery, and Zenith is predicting that global ad spending in 2010 will rise just 1%, with U.S. spending expected to slip 2.6%. Most projections going forward for 2010 are that U.S. ad spending will either show a meager gain or fall a bit more. Interpublic Group of Cos.' Magna forecasts that media firms' U.S. ad revenue will be lower in 2015 than in 2000 but they do expect high-single-digit (percent) annual growth in U.S. online advertising from 2010 through 2015. Marketing services is also a bright spot; ZenithOptimedia, part of Publicis Groupe, forecasts strong growth over the next few years in such areas as event sponsorship and public relations.
A new concern for the advertising industry is the looming prospect of increased government meddling in marketing took on new life in 2009, alarming marketers and ad executives. Among the possible areas for action are online consumer privacy, prescription-drug ads, limits on tax deductions for advertising and curbs on food advertising aimed at children. A bill to ban broadcasting of ads for erectile dysfunction drugs during certain times of the day has also raised concerns among ad firms. Over the summer, Congress passed the Family Smoking Prevention and Tobacco Control Act, giving the Food and Drug Administration control over the manufacturing, marketing and advertising of tobacco products. Ad executives worry that the move could set a precedent for other products, like alcohol and fast food. While none of these are big Yellow Page advertising headings, do you expect lawmakers who hunger for more revenue and control will stop there?
And could this be a sign of the times when Pepsi trades Super Bowl TV ads for social media. For the first time in 23 years, Pepsi won't be advertising during the Super Bowl. Instead, it will steer millions of dollars into a social-media blitz dubbed the “Pepsi Refresh Project”. This effort is intended to drive people to a dedicated Web site to pitch community-development programs. Pepsi will then select and fund thousands of the projects. "Pepsi will be leading an army of bloggers, texters and tweeters as it attempts to redefine the marketing game," writes Larry Woodard. "I, for one, want a front-row seat." It's a risky bet. Are they out in front of the pack, or about ready to drive over a cliff?? Stay tuned.
Yellow Pages:
Perhaps the best set of predictions for 2010 comes from Charles Laughlin, Senior VP at BIA/Kelsey Group made in a recent webinar (full slide deck):
– Print revenue declines accelerate - by design
- More publishers will migrate print to digital, assuming online is more sustainable and print losses can be slowed, not stopped.
– Mobile monetization takes hold
- Publishers will begin to trial discrete monetization paths for mobile search from discrete landing pages to PPC.
– Money pours into social media
- Publishers will build and buy social search platforms - and leave the Yellow Pages brands in the background.
– Opt-in passes - somewhere
- Despite efforts at industry self-regulation, opt-in legislation will pass somewhere, even if only for White Pages.
Here's mine:
- A slow economy will continue to handicap any significant improvement in overall industry revenues.
- Larger publishers will continue to seek the Holy Grail of a digital solution which yields significant revenues, provides the true value to advertisers like the print product does, and affords digital only sales people a chance to make a living. 2010 will be a year of more searching but no discovery.
- Independent publishers will continue to see market share gains as they march on with a local print solution and a limited IYP offering. Print still works and 2010 will be no different.
- Mobile experimentation will continue, but until someone can come up with a battery that allows you use that new 4G phone for an extended period, it will not become the solution for the industry's woes – at least not yet.
- Marketers will continue to use social media as their ad budgets remain constrained. But many will also step back and question the real ROI of these efforts.
- Opt-out and recycling efforts by publishers will continue to expand which will allow legislators to avoid for another year any more onerous laws which will undoubtedly cost jobs, limit small business growth, and hence, further reduce their already shrinking tax coffers. But this can't go on for ever if the industry doesn't show progress.
One thing is certain – it's going to be a wild year. Hold on and let's see where the ride takes us...