Sunday, September 28, 2008Samantha McCaughren, Business Correspondent
Media-buyers are saying that they are expecting more value for money as it gradually becomes a buyer’s market.
Advertising budgets are often the first to be squeezed when trading slows down, and media-buyers report that overall ad spending for the rest of the year will be down significantly on last year.
Television has taken the biggest hit, with RTE rates down by around 20 per cent on last year due to reduced demand. Other television stations in the market follow the rates set by RTE. Outdoor advertising and press are also seeing spending contract. Radio and the internet are holding steady, however, with both benefiting from a reputation as low-cost options for advertisers.
In terms of advertisers, retail is one of the sectors that is holding up spending levels, as special offers and deals are promoted to cautious consumers. Telecoms are also continuing to spend, while financial and motor advertising is tailing off. Recruitment and property advertising have fallen sharply, which is mainly affecting newspapers.
Published figures from advertisers’ body IAPI is one indicator of market trends, but the numbers are based on rate cards, so do not reflect the higher levels of discounting going on in a soft market. One of the clearest indicators of how the market is performing is RTE’s published figures for the price of TV commercials, as they are directly linked to the volume of ads booked in advance.
‘‘RTE station costs are a good barometer of how the TV market is performing,” said Paul McCabe, managing director of MCM. ‘‘RTE’s latest predictions are for double digit deflation during September, compared with September 2007, and this deflation is mainly driven by less money being spent with the station.”
He said that advertisers could just be deciding not to spend on TV, as it is seen as an expensive medium. Producing an ad for TV costs around €200,000 to €300,000.
‘‘Whether advertisers have less money to spend, or are spending less money on television, remains to be seen,” said McCabe. ‘‘Just because TV is down doesn’t mean the market is down. TV is much more expensive than radio, for example.
‘‘Your money goes further on radio, which puts it in good stead to weather any slowdown.”
Ciaran Cunningham, chief executive of Carat Ireland, said the agency had predicted growth of 6.2 per cent for 2008. ‘‘That would have been modest growth. The total market has grown in double digits in the previous six or seven years, so a slowdown was expected,” he said. ‘‘But we weren’t expecting an actual decrease in the market, which is what has happened.”
He said that the market would now be down 8 or 9 per cent this year, with television down about 5 per cent, press down 9 to 10 per cent and radio holding steady.
Commenting on the fall-off being seen, he said. ‘‘It started to kick in mid-summer - July and August. The first half of the year was very strong, but there has been a significant change and the final quarter looks weak. As you get into the year, the decreases become more and more pronounced.”
Cunningham said that financial advertising would be down, ‘‘which is a complete reflection on financial markets’’. Banks and other financial institutions have become big spenders on advertising in recent years as competition in the market intensified. But with consumer lending now less appealing to banks, the fight for consumers has almost come to a halt.
The car trade is also under pressure. ‘‘The motor category would not be strong,” added Cunningham, ‘‘and generally property and recruitment, which is the mainstay of press, would be significantly down.”
He also said spending by fast-moving consumer goods (FMCG) was down as confidence is shaken by tighter consumer spending.
The areas which are not down are retail and telecommunications. ‘‘There is a competitive dynamic in retail and a competitive dynamic in telecoms,” said Cunningham. For these sectors, particularly the grocery sector, the success of the business lies in winning market share. And so these brands cannot afford to spend less at the risk of losing out to rivals.
In terms of 2009, Cunningham said: ‘‘We haven’t formulated our thoughts on next year yet, it is difficult to know. But the days of strong growth are not going to be around next year. If there is growth, there’ll be modest growth but it is hard to know because there is so much volatility.”
Paul Moran of Owens DDB/Mediaworks said radio was doing well because of its close relationship with retailers. ‘‘A lot of advertisers, particularly in the retail sector, are spending more. And if any advertiser is really trying to generate footfall, rather than branding, radio creates immediacy and is a low-cost medium.”
Analysis by Mediaworks earlier this year indicated that spending on RTE TV advertising by alcohol brands was down by approximately 11 per cent, while financial TV advertising was down by about 14 per cent. But food spend was up by 7 per cent and telecoms by 31 per cent.
The agency had predicted growth of 4 per cent this year but the latter half of the year will be down and Mediaworks now expects a decline of 6 per cent in 2009.
All media-buyers said they were expecting more value for money as it becomes a buyer’s market. ‘‘While newspapers don’t bring down their rate cards, they are being a lot more flexible on rates. We are getting short notice offers on outdoor sites as well,” said Moran.
Cunningham agreed: ‘‘As things get tighter, clients will be putting pressure on agencies and media owners alike. In these times, there is a big focus on value and every euro spent.” McCabe said that media which have been slow to reduce prices in the past would be more likely to offer discounts.
‘‘Press in the Irish marketplace has historically been very expensive compared with other markets. Clients and agencies will look more closely at this if faced with tightening budgets going forward,” he said.
Some media-buyers believe the ‘frills’ of advertising may go on sponsorship, which used to be the icing on the cake of campaigns, without being core to a campaign plan. The sponsorship of the Late Late Show and Fair City are up for grabs, but RTE may find it harder to get deals than in previous years, said one media buyer.
While costs will come into focus across the sector, Moran said that advertising in Ireland had taken a huge leap in the past decade, and levels were still relatively strong.
‘‘One thing we have to realise is that we’ve seen massive growth in advertising investment since the mid-1990s and, even if we’re going back to the levels that were enjoyed in 2005/2006, that’s not a bad thing,” he said.
