Seven fat years (almost certainly) ahead for advertising industry
- Branko Brkic
- 27 Apr 2010 10:22 (South Africa)
In the advertising cycle of six to eight boom years followed by three years of bust, when do we know that the good times are officially back? When Sir Martin Sorrell says so, and when Google and the New York Times Co. prove it in their results.
It’s kind of like the story from the Old Testament about Pharaoh and his weird dreams. You know, the one about the seven thin cows that rose out of the river and ate the seven fat cows; and the other one about the seven withered ears of corn that ate the seven healthy ears. These were the selfsame dreams, you’ll remember, that were interpreted by Joseph – who, to his eternal credit, never thought there was anything strange in the idea of wheat eating itself – as foretelling seven lean years and seven abundant years for the people of Egypt. The parallels with the modern advertising industry are so obvious it’s a wonder Mel Brooks never wrote a pantomime on the theme.
Then again, maybe Brooks decided against it because he realised he’d need to cast Sir Martin Sorrell in the role of both Pharaoh and Joseph. To have the same guy as dreamer and interpreter probably wouldn’t have been great for the narrative or for box-office sales, even if such a scenario is the way things sometimes work in “the industry”.
So here’s what happened in said industry over the last two months:
In early March, Sorrell, the chief executive of WPP, the largest advertising group in the world, told Reuters that he believed the worst of the advertising recession was over and that he expected digital sales and emerging markets to help his company record flat revenues for 2010. As the man at the head of a firm that provides media placement, advertising and public relations services to multinational conglomerates of the size and influence of Unilever, Vodafone and Ford, Sorrell was telling the market exactly what it wanted to hear – he was also, in the process, exerting some not inconsiderable influence over WPP’s own share price.
In mid-April, true to form (and to Sorrell’s waking dream), Google, arguably the most powerful company in the world, reported a surprisingly strong 23 percent increase in net revenues for the first quarter of 2010. The results exceeded analysts’ expectations and were the third consecutive quarter of accelerated revenue growth for the search engine giant. Remarkably, the results didn’t impress investors, who appeared concerned that the strengthening economy would encourage Google to abandon the fiscal discipline it had been exercising during the recession. The company’s share price dropped almost five percent as a result.
Finally, on April 22, a week after Google announced its results, New York Times Co. reported stronger first-quarter revenues than anticipated, due to decreased costs and higher advertising income over the corresponding period in 2009. "As the quarter progressed we saw acceleration in the rate of advertiser spending across our newspapers, websites and other platforms, reflecting a firming of economic conditions," CEO Janet Robinson explained in a statement. Just as had happened at Google, though, the share price dropped anyway – it was proving to be such a good quarter for other media companies that analysts expected the owners of the New York Times, Boston Globe, and International Herald Tribune to do even better.
Sentiment, needless to say, is a fickle thing. To wit: how much of the rebound can be directly attributed to Sorrell’s declaration in March that the ad slump was over? Not all of it, clearly, but his statement certainly helped speed things along. The advertising industry tends to enjoy six to eight boom years, followed by three years of bust. It may well be a biased prophecy, a self-interested decree from the Pharaoh of the industry, but media needs someone to announce the start of the fat years.
Photo: WPP Chief Executive Martin Sorrell delivers a speech during a session at the Cannes Lions 2009 International Advertising Festival June 26, 2009. REUTERS/Alain Issock