Thursday, January 08, 2009

Advertising in a recession: Trust me. Honest.

When bubbles burst, the reality of the world rushes in...sometimes it just takes a while to sink in. When it does, it can be bracing...or life changing.

In our current burst bubble, many of us are experiencing a deficit of trust. In our leaders, in our advertising?

For some, it's been an accepted truth that advertising sells. And when times are tough, well, that's precisely the time to put your trust in advertising. Some have even go so far as to say that "you should advertise in good times, but you must advertise in bad."

But is that really a truth we can trust?

TNS Media Intelligence released ad spending for quarters 1-3 of 2008 (here). As many expected, Jan-Sept 2008 reflected a decline of 7% in ad spending overall. But I decided to take a look at the top 10 advertiser's spending and see what happened to their stock price during the same period.

The premise being that, if the recession began in December 2007, then wouldn't the biggest spender's stock price be a good proxy for earnings against which to test the must-spend pablum quoted above?

Here's the table from TNS appended with my analysis of the stock prices:

So what?

Two facts and a thought: (1) those who increased ad spending fared worst; (2) those who cut ad spending did better; (3) you can neither cut nor spend your way to growth.

My comparison of ad spending to stock price does not present a comprehensive picture or an absolute truth of course. But it does present a challenge to those of us who beleive in advertising: be honest about what advertising can do. Honesty...with ourselves and our the only foundation on which trust can be built. And honesty requires more than words.

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