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MAGNA Global’s Coen: Ad Climate Could Be Worse

With the perspective of more than a half-century in advertising forecasting, Robert J. Coen finds the media climate troubled. But he’s seen worse.Coen, director of forecasting at ad agency giant Interpublic Group’s MAGNA Global Worldwide, started his advertising career in 1948 and has worked for the same company ever since. He speaks with B&C’s Robert Marich about the overall soft U.S. advertising landscape and the impact of new media on traditional media.

Q: While most of advertising is depressed, some ad segments are showing strength, such as search, Web ads and out-of-home. How bad is it out there?

A: There are pockets of strength, but some of these are not directly helping traditional advertising but actually hurting it. If you can get help-wanted ads free on the Internet, that doesn’t help classified advertising in newspapers. Also, I’m not sure if search is advertising as much as it is sales promotion.

Q: Your forecast is that the four networks will grow a healthy 7% this year. What’s the outlook after that?

A: 7% is more than it’ll get next year [without the Olympic Games and election]. The prices at the networks have been rising almost twice as fast as the general inflation rate, so marketers are looking elsewhere to get more bang for their buck. But new product introductions could fuel some extra demand, such as new-model cars that are very fuel-efficient. But I wouldn’t count on extra demand happening too soon.

Q: You also forecast that basic-cable networks will grow ad revenue 8% this year. Should they be satisfied with that, given the across-the-board investment in new programming?

A: They should be happy because anyone doing better than nominal GDP [gross domestic product], which will be around 5%, should be happy. Cable programming has improved and is very efficient in targeting audience niches. But if they become overly aggressive price-wise, they lose their advantage.

Q: The general economy is deteriorating, and it seems that every week, some bedrock advertisers say they are going to slash marketing spending. How bad is it out there?

A: This is not the worst I’ve seen, which was a stretch in the mid-1970s and 1990-91. Advertising’s percentage of GDP is slipping now, but it’s not as low as those periods. In those times, promotion was taking advertising money with couponing, trade promotions and other price promotions like we’re seeing today. Everything was for short-term results. But I don’t think that can keep up forever.

Q: Will political ads bail out TV stations this year?

A: Six to nine months ago, the stations said that they were hopeful there would be a lot of spending in the primaries, although that didn’t work out. But now when we get to August, there will be candidates in very competitive races. For example, every member of the House of Representatives will be fighting to keep their seat. I think we’ll see a real uptick in political advertising in August and September and going into November.

Q: Do you think new TV metrics like return on investment and engagement will eventually give TV the audience-research ammunition to match the appeal of Web sites and new media?

A: We’ve been hearing a lot about this. If there were clear evidence of ROI, there wouldn’t be the slackening off we’ve seen. All these new metrics are more evolutionary than revolutionary.

Q: New media has sizzle in the ad community, so is TV losing favor with advertisers?

A: There is a lot of rhetoric and talk about new emerging media and, in particular, a lot of attention on video online. But after you sit at a computer all day at work, you want to go at home and watch TV. So I don’t think TV is dead yet.

Q: Earlier this month, you reduced your forecast for U.S. ad-spend growth from 3.7% to 2%. If the forecast turns out to be off, is the actual figure likely to be above or below 2%?

A: When we make a forecast, we at look at both the pros and the cons, and then split it in the middle. It would be more pleasant to revise upward. My expectations are that Olympics and then election ads will start pouring in August, September, October and early November. Then later in the year, some big categories like automotive could start to look better because of comparisons (to weak ad spending a year ago). Those are the pluses. But the weak economy, energy prices, credit problems and other bad news could drag it in the other direction.