Media Bytes
September 22, 2008
In Scary Times, Advertising Firms Offer Messages of Strength
By Stephanie Clifford and Stuart Elliott
The New York Times - September 22, 2008
EARLY last week, as the American International Group began to crumble, marketing executives at a large competitor, New York Life Insurance Company, huddled in a series of meetings. They already had an advertising campaign running, but they sensed an opportunity to capitalize on the fast-changing conditions for their industry.
On Thursday, after a presentation to Theodore A. Mathas, the chief executive at New York Life, the executives won approval for an additional campaign. They dispatched their agency, the New York office of Taxi, to create ads that would play up the reliability of New York Life.
“At a time when well-known brands have gone by the wayside, we want to distinguish New York Life from the public companies and others that have had such difficulty,” said William Werfelman, first vice president at New York Life.
“It’s now a matter of very quickly developing creative,” he added, to react to the market shifts.
New York Life is one of several financial advertisers seeking to take advantage of the current economic turmoil. But the uncertainties spawned by the unprecedented events — the collapse of Lehman Brothers; the rescues of A.I.G., Freddie Mac and Fannie Mae; the proposed acquisition of Merrill Lynch by Bank of America — are raising flags of caution on Madison Avenue as executives worry that no amount of advertising may reassure an anxious public.
“In the last couple weeks, you could smell the fear in New York,” said Martin Sorrell, chief executive at the WPP Group, which owns agencies like Grey, JWT and Ogilvy & Mather, as “institutions that were regarded as invincible have gone down or had to be bailed out.”
“The scale and the speed of all that have shaken people’s confidence,” he added, and it could affect attitudes “for the rest of the year going into next year.”
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The advertising industry, including giants WPP, has typically used layoffs or other cutbacks to get through tough times. No one is announcing widespread dismissals at the moment, but throughout 2008 — a bumpy year even before the Wall Street crisis — there have been layoffs at agencies around the country.
“The volatility in the financial markets is clearly creating uncertainty for both marketers and consumers,” said Michael I. Roth, chief executive at the Interpublic Group of Companies, which owns agencies like Draft FCB, McCann Erickson and R/GA.
“This will require us to focus even more closely on helping our clients navigate through this environment,” Mr. Roth said, “and at the same time managing our business efficiently.”
The biggest challenge, executives say, is trying to keep up with the stunning economic and financial events and the resulting mood swings, as evidenced by the roller-coaster ride from the despair of Wednesday to the euphoria of Friday. All that makes it difficult to determine how to best persuade shoppers to open their wallets.
“Right now, there are nothing but question marks,” said David Sklaver, president at KSL Media, a media planning and buying agency.
“Every time you think all the shoes have dropped on Wall Street, another one drops,” he added. “There are more shoes in this closet than Imelda Marcos’s.”
The result is that “we have to batten down the hatches for the near term,” Mr. Sklaver said. “For every client, it’s constantly trying to understand who their best customer is, and building a fence around that customer, treating that customer better than ever before.”
One lesson learned of late, according to Mr. Sklaver, is that advertisers and the media can no longer “treat the wealthy as a mass market” — that is, expect robust growth to continue indefinitely in sales of high-end products like luxury goods at upscale stores.
“Premium products were unassailable,” Mr. Sklaver said, but the trouble on Wall Street suggests that “they’re not enough to support the economy.”
The decline in sales of expensive items has been one factor contributing to a slowdown in demand this year for commercial time and advertising space, even with the stimulation of the so-called quadrennial effect of the Summer Olympics and the presidential election.
For instance, the Nielsen Monitor-Plus division of the Nielsen Company reported last week that ad spending in the first half of 2008 fell 1.4 percent compared with the same period a year ago. The laggards included ads in national magazines, down 3.1 percent; national newspapers, down 8.1 percent; and spot radio, down 10.1 percent.
“The health of the advertising economy depends on the health and vigor of consumer spending,” said Jon Swallen, senior vice president for research at TNS Media Intelligence, a unit of Taylor Nelson Sofres that will announce its data for the first half on Tuesday.
“To the extent the financial mess forestalls a general economic recovery and makes consumers feel antsy,” Mr. Swallen said, “a recovery in ad spending is being pushed farther out into the future.”
Another reason ad spending may decline is the shake-up in the ranks of the financial marketers. Although companies like Lehman Brothers and Merrill Lynch are not major advertisers, the extent of changes, including potential mergers and consolidations, among those that are “could in the long term mean less money spent,” Mr. Swallen said.
For some, that is also the case in the short term. For example, A.I.G. decided to discontinue its brand and corporate ads, which carry the theme “The strength to be there” — a message clearly thrown into question by the federal government’s bailout of the insurer.
The A.I.G. business units are still advertising products like auto insurance, said Charlie Armstrong, senior director for advertising and global branding at A.I.G., adding that for the A.I.G. brand “we are actively exploring messages and communications that would be appropriate for this environment.”
Still, New York Life is not the only financial marketer to increase its advertising presence.
An ad for Rockefeller & Company promises “Responsible and stable wealth management through turbulent times.”
An ad for Wachovia Securities asks investors to “Think long term,” adding: After 120 years, it’s second nature to us.”
And an ad for AXA Equitable says, “in these chaotic times, there is a financial services company dedicated to redefining commitment.”
The AXA ads, which began running on Tuesday, were developed over the last few weeks. “The important thing is to reassure people,” said Barbara Goodstein, executive vice president for marketing, that although “it’s scary out there, we are a company that’s financially stable.”
“That’s why we’re visible,” she added. “We’re comfortable being vocal at a time like this.”
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It is a smart strategy for those financial institutions that are stable, said David Haigh, chief executive at Brand Finance, a brand consulting company.
“When everyone’s reeling is the time for strong banks to talk,” Mr. Haigh said. “You want to know you’re with a bank that’s not going to go bust on you.”
Analysts note that many financial advertisers had started shrinking their budgets a year ago, when the problems with bad debt began roiling Wall Street. As a result, many media companies have already absorbed some of the blows.
“The financial ad category, when you look at the numbers, has been under pressure for a year,” said Vivek Shah, president of the Fortune Money Group at Time Inc., part of Time Warner. Ad spending, he added, has been “a leading indicator, not a lagging indicator.”
The magazines under Mr. Shah have adjusted their approaches, he said, to attract more advertisers in categories like technology.
Many of the most troubled companies were not large advertisers, however, because they sought corporate clients rather than consumers. Lehman Brothers spent only $259,000 to buy ads in the first quarter, according to TNS Media Intelligence, and Merrill Lynch spent $4.9 million. By comparison, TNS figures show that Bank of America spent $134.3 million in the same period.
It is unclear what the ad plans are for the Merrill Lynch brand after the Bank of America acquisition goes through; the brand name is to be retained on several units.
“It’s too soon to talk about any of those types of decisions,” said Joseph L. Goode, a spokesman for Bank of America. If the last week did not bring horrible news for media companies, neither did it bring good news. Financial advertisers made up 21 percent of the advertisers at national newspapers in 2007, according to an analysis by Sanford C. Bernstein & Company of TNS Media Intelligence data. And they accounted for 20 percent of Internet display advertising in 2007.
“The financial sector is a radically restructuring sector,” said Chris Rohrs, president at the Television Bureau of Advertising, who is also keeping a wary eye on automotive and retail, two other big ad categories for local TV stations.
The strengths of those categories “are entirely about confidence and the availability of credit,” Mr. Rohrs said. “We’ve had no confidence and a shutdown of credit.”
Even before last week, the bureau had forecast that revenue for TV spots in 2009 would decline by 2 to 5 percent compared with 2008.
Likewise, Mr. Sorrell of WPP had previously forecast that next year would be a difficult one for the advertising economy. “What happened in the last few days will make life a little tougher,” he said, “but not much tougher than we thought it would be anyway.”