Ad Recession: Probably over. Pricecutters beware…

ZenithOptimedia is predicting global ad markets will increase 0.9% in 2010 to almost $448bn (£274bn) and expects ad expenditure to show steady improvement over the next three years, with growth of nearly 5% by 2012. The global spending prediction is the Publicis agency’s first upward revision in 18 months and comes after the worst ad decline in modern times. Zenith also predicts ad spend to fall 10.2% in 2009 to nearly $444bn.
US online advertising spending is set to drop this year for the first time since 2002. eMarketer estimates online ad spending will be down 4.6% this year. However, the slowly recovering economy, combined with basic structural changes in how marketers and the public use media, will lead to Internet ad spending growth in early 2010.
“It’s been denied, but I would rebut the denial,” Sorrell said, calling the practice “extremely dangerous in my view. It’s particularly dangerous if we see media price inflation.”
Possibly related:
Zenith Forecast: In ’09, Only Online Grows
(paidcontent.org)
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Agencies: Traditional agencies too resistant to digital … Digital agencies not ready to lead … UK shops losing their touch …

Agency bosses too old and change resistant, claims Sorrell
WPP chief executive Sir Martin Sorrell (aged 64) claims that brands are not spending enough online because the people who run their agencies are too old and resistant to change. Delivering the opening keynote session at ad:tech New York, Sorrell criticised brands for investing an average of just 13 per cent of their marketing budget online despite the rapid increase in digital media consumption.

sir martin sorrell

Why Digital Agencies Aren’t Ready to Lead
Ana Andjelic opines: “Any conversation about digital marketing these days includes at least one mention that traditional agencies just “don’t get it.” While this may be correct, it’s equally true that digital agencies are not ready to take the lead. Look at the typical digital agency. It excels in exploring new horizons. It supports a flat and loose organizational structure in which a developer has access to the CEO. And it makes sure everyone’s opinion is heard. It’s one big crazy family. Digital agencies are having fun experimenting with ideas, technologies and strategies to find new alternatives superior to obsolete ways of doing marketing. That’s what they do best. The problem is, this is the only thing they are doing. When they are asked to actually follow through on their ideas, they often come up short. It is because they don’t know the business of marketing (or want to know it, for that matter), and they rarely have the organizational structure or past practices to guide them.”

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The London ad scene, which has long produced groundbreaking TV commercials that are the envy of New York creatives, is suffering through an identity crisis. Slowness in adapting to the digital reality is causing some intense navel-gazing, with many concluding that U.K. agencies and marketers have to get up to speed — and fast. David Droga grew up in Australia admiring British advertising as the best in the world, and at age 29 was made executive creative director of Saatchi & Saatchi London. Mr. Droga has since moved on — he left London for New York in 2003 — but he claims that U.K. creativity is still pretty much back where he left it nearly seven years ago. “There is no question that TV, press and outdoor are still the primary focus in the U.K.,” Mr. Droga said. “There is less integration there, and a tendency to default to the safety of TV and posters.” I might point out to Dave that this is probably true of the big shops in the US …

Possibly related

Sir Martin Sorrell: Rupert Murdoch’s pay wall plan is right (telegraph.co.uk)

Profits halved at advertising firm WPP (guardian.co.uk)

Does Sir Martin have another motive for peddling his alphabet soup? (telegraph.co.uk)

WPP profits down by nearly 50% (guardian.co.uk)

WPP sees little evidence of ‘stouter hearts’ needed to spend during downturn (telegraph.co.uk)

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Sir Martin vs Enfatico

I took no pleasure in the news that Enfatico “failed”. (Enfatico, for some reason attracted a slew of detractors). I am not even sure of the status of the company (“folded in” … but how?) The website is still up, but the last blog entry is June 9th. I am a firm believer in a holistic approach to marketing, and I think that Enfatico was more a victim of circumstance than of hubris. Sir Martin has his own take on matters…
enfatico
During an interview with Forbes India, WPP‘s Martin Sorrell was asked a number of questions about Enfatico and why it didn’t work. His responses were pretty finger-pointy, especially when he was asked about the one-off agency’s demise:
Q: Why didn’t Enfatico work then?
Sorrell: Because it’s an extremely difficult thing to do. And the two prime movers behind it left Dell.
The two prime movers are of course former Dell CMO Mark Jarvis and Casey Jones, Dell’s vp of global marketing.
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Razorfish: The Players, The Package, The Deal

The Players:
WPP and Publicis are competing to acquire Razorfish, reports PaidContent. That means two things: One of them will be forced to pay more than Razorfish is worth in order to get it; and it will be personal. WPP chief Martin Sorrell and Publicis boss Maurice Levy have a longstanding — and highly entertaining — personal rivalry.
Dentsu, the largest advertising group in Japan, has jumped into the fray as Microsoft opened the books to bidders for its Razorfish agency this week. WPP and Publicis, the rival communications groups, had already been considering an offer for Razorfish, a digital marketing specialist which could fetch around $600m to $700m.
razorfish
A Digital Agency … But That’s Not All…
There are a lot of players talking to Microsoft about Razorfish, among them Publicis, Dentsu, WPP, Omnicom, Interpublic and AKQA‘s private-equity investor, General Atlantic. But to best the field, the winning suitor will likely have to fork over more than money to the agency’s owner, which is looking for “strategic assets,” such as a commitment to buy its advertising offerings or use its technologies.
Microsoft is offering hundreds of millions of dollars worth of ad space to the potential buyer of its digital agency Razorfish as its pitches the deal to the likes of WPP, Omnicom, Publicis Groupe, Dentsu and Interpublic Group, which are all said to have expressed interest.
But Will It Happen?
Yet the chances of a deal being struck in the near term remain remote, according to analysts. For one, the acquisitions market is moribund, with credit still hard to come by for an acquisition that would cost between $600 million and $800 million. Razorfish generated revenue of $408 million last year. WPP, in particular, would seem unlikely to have the financial wherewithal to make an acquisition, after shelling out nearly $1 billion on digital acquisitions over the past few years. It is still in the throes of integrating TNS, too. Even as Sorrell expressed interest, he said WPP earmarked about $160 million for acquisitions, a fraction of what it would take to get Razorfish. That leaves Publicis as the only likely candidate to take on Razorfish.
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Mini Airstream, Smoking Smarties, Amex Simplifies, L-Shape

American Express launched a program in February 2009 to help consumers “simplify your finances” by paying off and closing their accounts. The carrot? A $300 cash card, redeemed when any outstanding balance is paid in full. The blogosphere is snarking at the campaign, pointing out that accepting the offer but not paying off the balance will still result in account closure — and no cash card. Not all cardholders “qualify.” AmEx has targeted specific customers that the company feels would benefit most from the offer. Those folks will receive the offer, including a special passcode, by snailmail.
amex
Sir Martin Sorrell said last night he believed the current recession would be L-shaped ­or prolonged, rather than “bath-shaped” as he famously described a previous downturn. The WPP chief and one of the UK’s best-known business pundits was giving the annual lecture of the Stationers’ and Newspaper Makers’ Company in the City on the topic “Recession. Bath, shower or whirlpool — which is it to be?”. Economists define L-shaped recessions as protracted periods of economic stagnation, such as that experienced by Japan in the 1990s.
sir martin sorrell


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