The ongoing financial crisis hits directly to media. During the past weeks, companies have reported their Q3 results (e.g. NYT, Gannett). Though the financial markets have been in turmoil for whole year, it was not before October when the biggest shock hit the public; it was the worst month for decades. So, the biggest impact to advertising wasn’t visible during Q3. If there is no surprise change – or a real miracle – during the last months of 2008, we may see nasty looking numbers when Q4 results are published.
Consumers postpone major purchases like new home or car and they will consider much carefully spending in general. So the downturn is not going to hit traditional classified advertising only, but retail advertising too. Robert G. Picard estimates how decline of economy would impact to newspaper business:
In the case of advertising, a 1 percent decline in GDP produces about a 3 to 5 percent decline in advertising. So a 3 percent decline could produce a 15 percent decline in income for many media firms. Print media tend to be most affected by recessions and their declines tend to be 3 to 4 times deeper than television because of differences in the types of advertising they carry.
Yet, not only newspaper or magazine advertising are affected. It seems that CPM’s for online advertising have already dropped in US markets and therefore 2009 is estimated to be a tough year for whole advertising market including digital advertising. Tough means, that we will see more announcements of restructurings and news about dropping credit ratings.
The interesting questions are: How much online advertising will gain market share during the recession? When the private consumption starts to grow, where will advertisers allocate their money? And finally, does this increase the speed how old media declines? My bet is that online classifieds as well as other digital media will be the winners of this crisis.
Picture above taken Sept 2008 in Cafe Smyrna, Istanbul, Turkey.
4 responses so far ↓
Clarification // November 1, 2008 at 1:09 pm |
Very interesting article. As for winners of the crisis, I also think you should take a close look at how search advertising is affecting the whole internet landscape and how classifieds are affected in this context. Have a look at the last IAB report for S1 2008 http://www.iab.net/media/file/IAB_PWC_2008_6m.pdf where you can see the trends in the period of search versus classifieds online. It looks like search is taking a stake of classified advertising or is it just the economic situation in real estate in the US in the period…?
Eero // November 2, 2008 at 7:18 am |
Hi,
thanks for the report. I think you answered the question in your last line:
Yes, search business or even contextual advertising as such is a “threath” for online classified players. However, as you referred, the classified markets has been affected by the financial markets already before October, though in public October was the month that everybody understood that this is real. In recession classifieds are hit as their revenue is mainly coming from RE, Car or Recruitment advertising – sectors that all are now in trouble.
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