How is the recession in Europe and the United States affecting the media industry? International media experts Vincent Letang and Mario Mateus explain.
There are few industries that are not being affected by the global economic crisis and the advertising industry is one of those facing significant challenges. The economic slow-down in Western Europe and the United States impacted on media buying the world over and forced the industry to react quickly and effectively to counter as much of the fallout as possible. So many of us are being proactive in minimising that impact and are identifying new opportunities to grow.
In their December 2011 update, MagnaGlobal, Interpublic Group’s (IPG’s) strategic global media unit responsible for forecasts and insight, predicted a slow-down in advertising growth in 2012 but, crucially, did not predict a recession. Analysts envisage advertising spend in Western Europe to grow by a modest 1.1% and by 2% in the US when you take out of the equation the expected incremental spend created by the elections and political advertising, and the money spent around the Olympics, which would take US growth to 3.7% for 2012.
The International Monetary Fund (IMF) has now officially announced that in 2012 the Euro area will be in recession, with real GDP down 0.5% in 2012 – in Western Europe Spain is expected to be down 1.7%, Italy 2.2% and France and Germany static at 0%. With the UK at 0.6% growth there is no doubting that the economic picture is worse than in previous years, although it is so far less severe than the 2009 recession.
This is bad news for the advertising market, which Magna expects to be further down in at least five markets in 2012 – Spain, Greece, Ireland, Portugal and France. The first four markets were already down in 2011. Germany and the United Kingdom might be able to show some growth (under 2%) thanks to a slightly better economy and the boost of the London Olympics.
However, Magna is predicting a return to growth in 2013 in some of these markets, as the IMF predicts 0.8% growth in the Euro area for 2013.
Meanwhile, advertisers want reassurance about the effectiveness of their communication investments – how their advertising decisions will contribute to their business outcomes, according to Marc Taback, CEO Initiative Media South Africa.
“Each day consumers are dictating the game more and more, and advertisers have to be quick to respond to the demands and expectations of a tech-savvy public,” Taback says. “Consumer-generated content is gaining in importance, as consumers consider the opinions of their peers as well as messages in brand communication when making purchase decisions. Brands are therefore looking to agencies to guide them in this new world – engaging with consumers, creating brand advocates and driving their business results.”
The industry is being led by social media and user-generated content at the moment – changing media metrics and investing in real time dashboards that allow us to track performance, respond quickly and optimise all touch points.
How we measure the success of a campaign is no longer about traditional touch points. So much is happening online and we have to respond to that. We are able to monitor the buzz, positive sentiment and perceptions that are taking place online in real time, through social media monitoring, and update the campaign accordingly in response to what consumers are saying.
Remuneration models are also changing so they are more linked to the value generated. “At Initiative, we have developed a performance-led approach in which everything we do, every stage from insight to activation, is measured and managed to optimise return,” says Taback. “Everything we do contributes to client sales, and is maximised against it. We won’t accept that half of advertising may be wasted – if we can’t measure it, we won’t do it. At times like this we believe clients are happier knowing that we are doing everything we can to ensure not one dollar is wasted.”
During challenging times, the industry has to adapt to every situation, rather than waiting for it to blow over. Risks drive opportunities and successful organisations and industries reinvent or transform themselves on such occasions.
That is what the industry is doing: investing in key assets that make communication resonate with consumers, effectively engaging them on all relevant platforms.
At the same time we are investing in measurement and performance technology that enables us to measure the impact of these activities in our clients’ business key performance indicators so that we can make their budgets work harder.
We are diversifying our activities and revenue sources, aiming to deliver more valuable solutions to our clients.
Taback says: “With some astute and quick reactions from agencies, advertisers should be able to ride the storm of the economic crisis and make the best of new and innovative opportunities so that budgets go further and are more effective.
“There is no reason why the techniques learnt during the tough times cannot benefit the industry when the economy returns to full health.”
Vincent Letang is the executive vice president and director of Global Forecasting for MagnaGlobal and Mario Mateus is the president of World Markets, Europe, Middle East and Africa at Initiative and Universal McCann.
This story was first published in the April issue of The Media magazine.
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