All the fuss about a robust advertising market is being checked by some harsh realities. First, how spending will be redistributed across exploding mobile devices, and second, how inflation and flattened auto sales are impacting the slowly recovering economy.
Such growing concerns barely get a mention when the press, media companies and many Wall Street firms gush over the percentage gains of the past 18 months. In most cases, the rise represents a partial rebound from the advertising collapse in 2009 rather than any genuine growth.
While the numbers vary slightly, the trends remain the same. Local TV stations, national and local cable, and total television ad spending in 2010 completely offset their devastating year-earlier losses. Broadcast TV networks NBC (owned by Comcast (NASDAQ:CMCSA) and GE (NYSE:GE)), CBS (NYSE:CBS), ABC (owned by Disney (NYSE:DIS)) and FOX (owned by News Corp. (NASDAQ:NWS)) - like overall domestic media advertising - will collectively manage a mere 3% growth this year - better than expected but barely keeping pace with forecasted real GDP, according to Morgan Stanley.
In the coming quarters, there could be increasing indications of inflation-wary retailers curbing their marketing spend, as was recently reported by Meredith. A slowdown in auto advertising will especially hurt local broadcasters. Without election year spending, they could experience a -2.3% decline in advertising this year, according to Nomura Securities analyst Michael Nathanson.
Far more unsettling is what happens to all advertising and marketing dollars over the next five years. The introduction of Apple's (NASDAQ:AAPL) iPad ignited the vibrant new platform of e-tablets, which promises to reinvent advertising. It will not only siphon ad dollars away from other media, including conventional Web sites, but will work as a catalyst for new spending. It will also redefine advertising and marketing on interactive devices.
As Apple jumps from 15 million initial iPad sales last year to a forecast 40 million iPad sales in 2011, while inspiring a category of new competitors, the total number of global e-tablet users are expected to reach 400 million by 2014, according to RBC Capital Markets. The big unknown is what impact the prevalence of e-tablets will have on interactive marketing and ad spending - as well as closely aligned e-commerce.
At some point in the near future, traditional advertising design and sales will become part of a larger, more potent interactive location and social-based, personal marketing business.
That media and Madison Avenue are treading into the unknown. Their advertising and paid-content business models are redefined and recreated by e-tablets, smart phones and other connected mobile devices. In his voluminous e-tablet report, RBC Capital analyst Mike Abramsky can say only that the consumer and enterprise proliferation of tablet devices creates "new and interesting digital advertising opportunities in both mobile search and display."
Don't be fooled by the absence of projections.
Given rapidly developing mobile consumer behaviors, I'm guessing that targeted location marketing, coupled with one-touch buying through apps and e-discount codes, will create a booming new category of mobile "advertising" that will suck the life out of some other media platforms before the end of this decade.
No one really talks in-depth about this obvious revolution in the making because it is nearly impossible to forecast or quantify.
Even with mobile platforms hitting critical mass, Internet guru Mary Meeker can speak only in general terms about the rapid growth and disruption of mobile advertising and e-commerce. The disconnect between exploding adoption of connected mobile devices and advertising spending is a short-lived phenomenon, given what Meeker predicts is an untapped $50 billion global opportunity, or the equivalent of global Internet advertising revenues in 2009. Mobile and online e-commerce combined could approach more than 10% of total U.S. retail sales by 2012.
eBay (NASDAQ:EBAY), for one, predicts mobile gross merchandise value will double to $4 billion in the fourth quarter.
Such stats underscore the great abyss between advertising as it was, as it as and as it will be this decade. The uneven rebound, spending and assessment of media ad spending was the focus of a recent review by CitiGroup analysts. Clearly, digital and cable TV are powering low-single-digital growth, and about 30% of total ad spending. But there's no way to know what the digital category will eventually encompass in interactive mobile devices - or how it will stretch the definition of adverting and marketing.
That uncertainty cuts both ways: It will be just as difficult to know how much spending will transfer away from traditional media platforms and to e-tablets, smart phones and other connected mobile devices, which will become the new default for all media.
As the redistribution of advertising and marketing dollars becomes more complicated - and perhaps more lucrative - the entire media business will need to retrench around new economic paradigms. Forecasting will temporarily become more imprecise. The unknown is hard to predict.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.