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Topsy-Turvy Ad World

Which is growing faster: Ad spending by automakers or display ad spending on the Internet? You'd be surprised...
Chevy Ad

“There's no earthly way of knowing, which direction we are going," Willy Wonka says while rowing down the chocolate river in Roald Dahl's children's classic Charlie and the Chocolate Factory. Now the ad industry is right there with him.

General Motors' advertising budget for the first nine months of 2008 rose 15.7 percent, according to a report released Thursday from market research company TNS Media Intelligence.

Meanwhile, U.S. advertisers spent just 7 percent more on Internet display ads over the year before, and growth rate for Internet display advertising have been falling for five consecutive quarters.

G.M.'s budget is growing, while the Internet's revenue is slowing! "Are the fires of hell a-glowing? Is the grisly reaper mowing? Yes, the danger must be growing!" Wonka says, echoing the state of the current economy.

According to TNS, G.M. spent $1.6 billion on U.S. media through September of this year. That's up from $1.4 billion over the same period in 2007. Caveat: the automaker had been dropping its spending over the past three years, so the rise just brings G.M. back to its spending level in early 2006, according to TNS senior vice president Jon Swallen.

"They basically this year have pulled out all stops on marketing in order to try and move inventory," Swallen said. "You have to wonder going forward, can they sustain this?"

What constraints might government put on their advertising budget? Should taxpayers pay for advertising to persuade them to buy cars made with their own money? Should they pick up the tab for Mary J. Blige's appearance in a Chevy commercial?

Now to the other side of today's Twilight Zone economy: the slowing growth of Internet advertising.

This is occurring despite the fact that the Internet allows marketers to target very specific groups of consumers, provides more data on the performance of an ad than other media, and tends to be less expensive. These qualities should benefit the medium during a downturn.

But TNS' numbers aren't the only ones showing a slowdown in Internet ads with images and slick design. "Display is suffering because many of the vertical industries—such as auto and retail—that are key players for the format are slashing their ad budgets," the research firm eMarketer reported earlier this month.

In August, eMarketer predicted 16.9 percent growth in display ad spending, but the new predictions show slower growth, at 3.9 percent.

Swallen, of TNS, said the lower Internet figure is an ominous sign for everyone. "The slowdown is getting broader at the same time that it's getting deeper," he said.

Over all, TNS reports, advertisers spent 1.7 percent less on advertising in the first nine months of 2008 than in the same period of 2007. For the third quarter alone, spending was down 2 percent from the year before.

Yes, the danger is definitely growing.


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