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Advertisers Ratchet Down Spending: “A Seismic Shock"

The large-scale shift in social mood from positive to negative, as indicated by the swift and dramatic downturn in the stock market, has led to businesses scaling way back on advertising spending.

Indeed, a major hotel company's top executive says their ad spending has "gone dark."

One ad executive describes the scenario as a "seismic shock."

You can get details on how the world of advertising has been severely shaken by reading this excerpt from an April 3 New York Times article:

Facebook has described its advertising business as "weakening." Amazon has reduced its Google Shopping ads. Coca-Cola, Kohl's and Zillow Group have stopped or limited their marketing. Marriott's advertising, in the words of the company's chief executive, has "gone dark."...

During the Great Recession, more than $60.5 billion in global ad spending evaporated, according to the WARC research group. It took eight years for the industry to fully recover.

Close observers of how the advertising business has fared in recent weeks say the new crisis may be worse.

"It was a seismic shock, possibly the biggest we have faced, ever," said Harris Diamond, the chief executive of the advertising company McCann Worldgroup. "It all took place in a very short period of time, and is having an impact everywhere we communicate."

Overall spending on digital ads for March and April is down 38 percent from what companies had expected to lay out, and ad spending has fallen 41 percent on TV, 45 percent on radio, 43 percent in print publications, and 51 percent on billboards and other outdoor platforms, according to the trade group IAB.

Advertising giants like Interpublic Group and Publicis have suspended their financial forecasts, saying they were uncertain about the future. The Cannes Lions conference, one of the biggest events on the ad-industry calendar, was postponed last month, then canceled early on Friday.

The major TV networks will not be hosting their annual New York gathering, known as the upfronts, to hype their fall shows before an audience of corporate sponsors and ad executives. Similar events for digital platforms like YouTube and Hulu were also postponed.

This downturn in advertising spending is a reminder of this chart and commentary from the February 2008 Elliott Wave Theorist, which published before the worst of the 2007-2009 stock market plunge:

MagazineAdvertising

The advertising industry got clobbered in the depression [early1930s]. Space in magazines dedicated to ads dropped by 70 percent. This chart does not take into account lower prices for ads, either, so the revenue decline over three years must have been breathtaking. This time around, the decline will occur in TV ads for sure and probably for paid Internet advertising as well.

As we know, the worst of the Great Recession was yet to follow.

This time, the financial downturn may turn out to be even worse.

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