Go back a year. Who would have predicted the industry would be in the state it is today?
I’m sure that if belts get any tighter, I’m going to lose feeling in the lower half of my body. Every single media owner I speak to tells me things are extraordinarily tough out there. Ditto for agencies.
So what happened to the forecasts that it would “stay pumping until 2010”? It seems the universality of the world’s economy has kicked everyone in the backside. Local factors and market conditions took a backseat. The fragility of the globe’s financial system came rapidly into focus, and even the economically secure shifted uncomfortably in their seats.
So far we’ve avoided a complete meltdown à la 1929, where the US economy remained at rock-bottom for three years, and was only climbing out of the hole 10 years later.
Still, predictions are gloomy, and apparently we’re looking at two or three really tough years.
What does this mean for the media and communications industry? To start with, the media owners are really going to have to box smart for their money. More and more of my clients are becoming really involved in annual negotiation sessions, and are looking way beyond discounts.
Clients are looking for real value nowadays. Spend is everything but arbitrary, and the smart media owners will already be putting on their thinking caps in terms of coming up with irresistible ideas, new concepts or real-value propositions for clients.
It’s a win-win, but only for those that get. For those that don’t, I see a hard slog in 2009. No matter which media owner you talk to, volumes are certainly heading below last year, and revenues are flat at best.
And the agencies? There will be casualties in 2009: mergers, and even closures at all levels. We forget how fragile the economy of an ad agency is. Working to 16.5 percent, then paying overheads, staff, and the media partner, usually leaves around 2 percent on the table.
Drop your billings by 10 to 20 percent and you’re heading for the red. Add to this the complicating factor of marketers looking for alternative communication channels on depleted budgets and diminishing sales, and the picture is far from rosy. The winners are sure to be not the strongest, but the most affordable.
Media agencies too are in an unenviable position. Margins are always under pressure, and incredibly thin.
So, one of two things will happen in the not-too-distant future: Either they are reabsorbed into mainstream ad agencies (which I really don’t think will happen), or they have to broaden their offering in order to make more cash. A broader offering will open up new revenue resources, and certainly deliver margins unheard of in media agencies. Opportunities abound.
As we approach 2009, there has certainly been a blurring of roles and responsibilities. The communication strategy, promotions strategy and media strategy have to fit hand in glove, and as a result strategic consultancies would sit comfortably in media houses. For the same reasons, it is not a great mental stretch to see public relations and production fitting in per fectly as well.
Of course, whether media agencies can take the risk, have the inhouse skills, and afford to fund such ventures, is a whole other story. But 2009 could give rise to ventures of this nature – adversity always brings out the greed in people.
One has to see 2009 as the catalyst of change. Challenges will come thick and fast to the marketing and communications industry. There will be opportunities, but these will surely be counterbalanced by the instinct to survive, to batten down the hatches and to hibernate.
Harry Herber is the group managing director at The MediaShop.
- This article first appeared in The Media magazine (January 2009).
