Annus Horribillis

The world changed in September 2008.  The subprime mortgage debacle in the US and the subsequent collapse of major financial institutions drove the world rapidly into recession.

The advertising industry quickly felt the pain of tightening consumer spending and budget reductions.  The media sector who largely derive their revenue from the sale of display advertising, retrenched and started to report massive profit declines and quarterly losses.

The industry is only now starting to see a recovery but the burning question for many media outlets is ‘was the downturn cyclic, or has the recession created a structural change in the way advertisers buy media and how consumers engage?’.

Across the media sector, all players were feeling the pain but the leading two offline media,  Television and Newspaper, felt falling revenues more than most.

I’m reminded of a schoolboy rugby line my father often quoted to me: “the bigger they are, the harder they fall.”

Well, they fell hard.

In the three months to December ‘08, Rupert Murdoch’s NewsCorp announced a US$6.4B loss compared to an US$832M profit for the same period a year earlier.

Across the media sector, all players were feeling the pain but the leading two offline media,  Television and Newspaper, felt falling revenues more than most.

I’m reminded of a schoolboy rugby line my father often quoted to me: “the bigger they are, the harder they fall.”

Well, they fell hard.

The pain of the advertising downturn was felt across all media.  Except online which, despite seeing growth decline on previous years, has shown a surprising resilience in the face of massive advertising price cuts across the leading media of newspapers and television.

In the UK, by June ‘09, spend on online advertising (including search, classified and display), had overtaken television revenue for the first time.

Whilst television spending in the UK had dropped by over 16%, online ad spend lifted 4.6% in the toughest economic environment since the Internet was born.

On the same day as the BBC in the UK proclaimed online as that country’s leading advertising medium, and only twelve months since the Lehman Brothers collapse, back here in New Zealand, TVNZ reported a 5.4% decline in reported advertising revenue and a drop in profit of a massive 89% on the previous full financial year.

For the first six months of this year, the New Zealand Television Broadcasters Council (NZTBC) reported a 13.3% decline in ad spend.  For the same six months, here in New Zealand, the Interactive Advertising Bureau announced a lift in online display advertising of over 10%.

Of course, in New Zealand, where online made up only 8% of all ad spend in 2008, this sector is not going to topple newspapers and television this year.  But it will happen.