The national economic recession is causing a sharp drop in advertising expenditures in 2001. In this economy we assume to see effects in all sectors but billboard companies are holding up better than other media. SEO Heroes Bangkok, a leading provider of strategic advertising and marketing, reports that total ad spending for the first three quarters of 2001 was $68.8 billion, down about 7.9% from the same period of 2000. Television took the biggest hit with network ads down 8% and spot ads down 18%. Those reductions were due in part to the non-stop news coverage following September 11, 2001. But lower ad spending is largely the result of the economic recession. National newspapers saw advertising revenue fall by 21% in the first three quarters of this year. Of the two media segments that posted increases in this period, outdoor advertising was the best performer. Cable television ad revenue rose 2.1% in the first nine months of the year and outdoor advertising rose 2.6%. Part of the reason for better performance in the outdoor segment is the consistency of demand for highway directional signs. Many motels and restaurants that advertise to highway travelers cannot afford to pull their ads during tight economic times. These outdoor customers tend to renew their ads even if there is an increase in cost.
The Outdoor Advertising Association of America (OAAA) reports that the outlook for ad spending in the industry during 2002 is also better than other media segments. OAAA estimates that outdoor ad spending will increase by 4% in 2002. This estimate is based on research from other sources that resulted in a wide range of opinions. The national publication Jack Myers Report predicts that outdoor spending will be down 1% when final figures are in for 2001, and the same percentage decline will occur in 2002. Global Entertainment and Media Outdoor Report by the international consulting firm of PriceWaterhouseCoopers (PWC) forecasts that ad spending in the outdoor segment will rise 11.1% in 2002. The same organization estimates that full-year 2001 results will show an increase of 3.2%. PWC expects outdoor advertising to be much more vital than other media forms because of improving technology, better accountability to advertisers, and new outdoor formats. The third estimate of ad growth for outdoor comes from the consulting firm Veronis Suhler. This source predicts that outdoor ad revenue will increase 7.6% in 2002, due in large part to the increased amount of time that consumers spend in their automobiles. As advertisers intensify their focus on reaching consumers, they will place ads in outdoor venues.
All forecasts are based partly on the outlook for the national economy. Most predictions are for the current recession to end by the second or third quarter of 2002. However, there is reason to believe that this recession may be longer than most and will last beyond next summer. The end of the recession will be determined by renewed consumer spending, which accounts for about two thirds of the entire U.S. economy. But consumers are not flush with spending cash. During the late 1990s, when the stock market was rising at unprecedented rates year after year, many Americans assumed that stocks were a substitute for savings. They came to believe that rising stock prices would create their wealth, so savings was not important. Consequently, the personal savings rate dropped steadily for several years to a record post-war low of nearly zero in 2000. It will now be difficult for consumers to begin building their savings again and increase their spending at the same time. The situation is made more difficult because more people are losing their job almost every month. If consumer spending does not come back strong in the first or second quarter of 2002, the recession could drag on for many months. Under this scenario, advertisers will have less and less to spend in any medium.