Ad spending cools in 1999
Outdoor media and Internet show fastest growth

Advertising spending in major media increased by just 3.4 per cent in 1999, the lowest level in five years, according to a study to be made public next week by Carat Expert, a media analysis firm. The real increase is even bleaker since the total includes inflation which was 1.7 per cent that year.

According to Gilbert Paquette, the firm's vice-president and general manager, the weakness in ad spending last year, after strong annual growth averaging 7.45 per cent during the 1995-1998 period, was due to several factors.

The telecommunications sector, which saw large amounts of new cash invested in advertising since 1995, particularly in expanding areas such as digital wireless telephones, saw increases taper off as consumers became more familiar with the companies' new products. 

Mergers in such sectors as financial services resulted in advertising budget cuts in the consolidated units. Other companies, fearful of the potential impact of the Y2K problem, created reserves to finance communications with clients in the event of difficulties.

Finally, but probably most importantly, the drop in 1999 ad spending was probably just a return to normality after four strong years of growth that occurred as the Canadian economy pulled out of the recession of the early 1990s.

The Carat Expert study, which was designed primarily to keeps its clients informed about larger media trends, offers an informative glance into the evolution of advertising during the past decade.

The statistics are drawn mostly from previously published material such as receipt reports from the Canadian Radio and Telecommunications Commission, estimates from the Internet Advertising Bureau and Statistics Canada. But what is interesting is the way the data is accumulated and charted to shed light on how the industry is progressing as a whole, and how the individual ad media are performing relative to one another.

Television, which continues to grab the largest share of advertising dollars spent in 1999 - 34.1 per cent, up from 31.8 per cent in 1990 - saw revenues inch up 1.6 per cent in 1999, or just about last year's inflation rate. 

Television continues to be regarded by advertisers as the most prestigious ad medium, in spite of the fact that fewer shows - Survivor and Who Wants to be a Millionaire? notwithstanding -- are able to hold mass audiences.

In spite of this, viewers continue to stay in front of the box. But instead of watching the major networks they are increasingly flipping to the ever greater number of specialty cable channels available.

What is less clear is how television will perform over the long term with the advent of the Net. Already according to the study, young Canadians aged 12-17 are spending an average of 9.3 hours a week on the Internet compared to 11.7 hours in front of the television.

Daily newspapers continue to get bad press due to declining readership and the Carat figures bear this out to some extent, showing stagnant ad sales growth averaging 2.1 per cent a year during the past decade. But the medium maintains some surprising advantages. This is due to the fact that most dailies can still reach broad audiences in their individual markets, something television, with its fractionalized audiences is less able to do. 

In spite of the huge growth rates in Net ad spending, and the corresponding media hype, the medium accounted for less than one per cent of total ad dollars spent in 1999. However Canadian spending will likely follow that in the U.S., where the total is already 2.1 per cent and growing fast. 

A bigger story in terms of its sales impact has been the emergence of outdoor signage as an increasingly effective ad medium. This is due in part to new products such as bike rack signs, 3D panels as well as urban sprawl, which puts more people in cars where they can see the signs making the medium more attractive to advertisers.  

Radio's share of total advertising dollars has dropped during the past decade, and the medium continues to be threatened by the advent of the Net. Radio's decline could easily be accelerated if the CRTC does not wake up and loosen its overly complex and burdensome restrictions to let the stations broadcast what consumers want to hear, not what Ottawa bureaucrats think they should.

Ironically, with all the talk about how the new digital universe threatens traditional media, what is interesting about comparing the data at the beginning and end of the 1990s is not how much things have changed but how little. Television gained a few points, daily newspapers lost a few, but not one of the major media groups saw their share of ad dollars change by more than four percentage points. 

However there are several big stories to watch out for. Will daily newspapers react fast enough to the advent of the Net, by moving their readers on-line? And will  "web casting" - streaming video broadcast over the Net - cost television more viewing hours that it can pick up by offering interactive TV to customers who can access the Net via the tube? Stay tuned.
 

Chart: Please check EPD for chart to run with article
 

E-mail can be sent to Diekmeyer at peter@peterdiekmeyer.com

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