It's a quirk of human nature that when economic times are good, it's difficult to imagine them ever being bad and vice versa. That explains why although we see signs of an economic rebound, we have a hard time believing it. Yet things may actually be improving. According to a report in USA Today last month, 46 surveyed economists thought the economy is turning the corner faster than expected, and there's little risk of slipping back into a recession. Yet few are rejoicing because this doesn't feel like a recovery. The optimists, led by Daniel Gross, author of Newsweek's "America Is Back" cover story last month, believe that we are in the midst of a strong resurgence, but they are in the minority. If others believe it, they are keeping quiet about it.

Why? Because they can. But journalists are compelled to get into the prediction business.

In offering our overview of some of the top business categories on the eve of the upfronts in this current issue—a package that includes looks at autos, entertainment and telecom, among other segments—AdweekMedia has been prompted to prophesize by proxy. We don't offer auguries, but we quote people who do. And the phrase that most pops up in those reports is "cautiously optimistic," which narrowly edges out "too soon to tell." Since the advertising industry is a lagging indicator, it's easy to predict how our industry will fare. Once the economy improves, so, eventually, will ad spending. Cautionary note: Interpublic's Magna predicts that the U.S. ad market will grow by just 0.1 percent this year.

The other factor that pops up in prognostications about TV spending is competition from digital. Here, the argument goes something like this: Mass media is dead. People don't sit down and watch TV together anymore. Instead, they go on Facebook and experience their favorite shows on their iPhones. To which a seller of TV time will counter: That may be true, but tell me, where else can you get 20 million or so people together to watch anything these days?
 
The TV sellers have a point. The way things are shaking out, TV, particularly live "event" TV, is not only more popular than ever, but it is also the straw that stirs social media conversation drink. If you've ever visited Twitter during the Academy Awards or the Super Bowl or even the People's Choice Awards, you'd know this is true. That's why few big brands are actually swearing off TV. To the contrary, recently we've seen companies like Starbucks and Zappos embrace TV for the first time. All of this is good news for those invested in the status quo. And if you've managed to stick around through the last year or so, you deserve some good news. Maybe now you can even imagine that things will get better.





Autos: The Road Ahead Slowly Rises

By Steve McClellan


The auto industry isn't out of the wrecking yard yet, but improved financial results, a surge in vehicle sales, increased ad spending and planned model launches signal something rare for the car industry for this year's TV upfront: possible good news.

Then again, in a way, there's nowhere to go but up. Thanks to the recession, last year was perhaps the worst of all time for the U.S. auto industry. Two of Detroit's Big Three—General Motors and Chrysler—filed for Chapter 11 (later emerging as reorganized entities) as car sales fell more than 20 percent.

Total ad spending in the car sector slumped 23 percent, or $3.3 billion, according to Kantar Media, while the outlay on broadcast network TV was down about 9 percent and the cable network spend was off about 5 percent. But with the easing of the recession this year, car loans have been a little easier to get, and sales are up double digits in the first quarter, according to J.D. Power & Associates. Gradually, the automakers are also starting to see improved results. Just last month, Ford said it swung to a $1.2 billion profit in the first quarter from a $1.4 billion deficit in the same period last year. And GM officials have stated that they expect the automaker to be near break-even on an operating basis this year—not great, but a vast improvement from the $30 billion loss the company incurred just two years ago.

At the same time, auto companies have loosened the purse strings and have begun spending more in both local and national TV. "The unknown variable," says Jon Swallen, svp, research for Kantar Media, "is the level of new car sales going forward because in the end that is going to go a long way in determining how aggressively the auto industry spends." So far this year, the vehicle sales picture is substantially brighter than in 2009. For each of the first three months of the year, volume has been up 20 percent to 30 percent from a year ago, according to Jeff Schuster, executive director, forecasting at J.D. Power and Associates.

Of course, those results are tempered by the fact that 2009 sales were down 21 percent to 10.4 million units. This year, J.D. Power is forecasting a 13 percent sales surge to 11.7 million vehicles sold. By historical standards, that's not great (consider that sales peaked in 2000 at 17.4 million units), but Schuster says, "We're moving in the right direction." A full recovery in the sector could take another two and a half years until the end of 2012, when sales are expected to get back to the 15 million or 16 million range. "It's a fairly long recovery," Schuster adds.

Ad spending levels in the auto sector "historically have correlated fairly closely to new vehicle sales," says Kantar's Swallen, who adds that in the last three to four months, "we've seen some very aggressive spending levels" as auto manufacturers have tried to "prime the market." For the first two months of the year, auto ad spending is up between 20 percent and 25 percent, according to Kantar data. But that kind of spending won't continue unless the pace of new car sales keeps up, Swallen cautions.

On the TV side, local market auto spending started to surge first in December, at double-digit increases, with network TV spending following suit after the turn of the new year, Swallen says. Kantar's March data wasn't available at deadline, but Swallen feels "pretty confident that the March numbers for national TV are going to be very robust in the automotive category."

New model launches are also on the upswing this year and next, which will likely contribute to increased ad spending as well. According to J.D. Power, manufacturers are planning a combined 53 new car launches this year and next, up about 26 percent over the previous two years. In addition, nearly 70 model redesigns that require ad support will also be introduced over 2010 and 2011. That's double the number that occurred in the previous two years.

General Motors, for example, has six launches planned for 2010, including the Buick Regal, Chevrolet Cruze and Volt, and the Cadillac CTS coupe. In addition, the company is introducing what it terms heavy-duty versions of the Chevy Silverado and GMC Sierra full-size pickup trucks, according to a GM rep. "In 2009 there were more minor changes," Schuster says, "but when you look at 2010, 2011 and 2012, you see new entries coming back and redesigns, which are full-model changes, also coming back."

GM declined to discuss its ad strategy, citing competitive sensitivities. But Swallen reports that both GM and Ford led the resurgence of auto advertising early in the year. Since then, the foreign car companies have started to spend more as well. "The imports didn't start increasing spending until late January or early February," he says. "But it's more level now across the leading manufacturers both domestic and foreign." How the carmakers spend in the upfront, he adds, will be a litmus test of their "confidence in new vehicle sales looking down the road." 

 


Beverages: Feeling Drained

By Todd Wasserman


There are things that consumers can't do without in a recession—like food and cellphones—and then there's stuff they can easily swear off. Unfortunately for the cola giants and the country's brewers, their products fall into the second category. When the economy went south, people discovered they could forgo their can of Coke and drink tap water instead. They could even ease up on beer, or at least switch to something cheaper.

The recession, though, was just a chaser after years of a continuing slide. According to Beverage Digest, beverage sales fell 2 percent in 2009—not horrible, but not what you'd call great, either. "It was not a good year," says John Sicher, the periodical's editor. "But we can't figure out if it was an anomaly or part of a trend." Meanwhile, beer suffered its worst dive in consumption since the 1950s as unit sales fell 2.4 percent, according to the newsletter "Beer Marketer's Insights." Analysts in both industries say that things looked slightly better in the first quarter, though it's too early to say whether a recovery is in the works.

The same could be said for most categories, not to mention the economy as a whole. But the beverage industry has its own set of issues. The mainstay of the nonalcoholic segment, soda, seems to be slipping into a permanent decline. Teens, long seen as the prime audience for soda, consider the fizzy stuff passe.

Energy drinks stole their thunder years ago, but sales of those have flattened out, Sicher says.

Even bottled water—the low-tech, high-margin miracle of the past several years—has watched its market share dry up. Why? Check the container. Eco-conscious consumers "know it's not a product that should be sold in plastic," says Bill Sipper, COO of New Leaf Brands. ("Ironically," he adds, "they have no problem with buying soda in a plastic bottle.") The contraction of the bottled water market prompted Coca-Cola to shut down its Aquarius Spring Water, a lower-end companion to its Dasani brand.

That's not to say that beverage giants like Coca-Cola and PepsiCo are curling up in the fetal position. In a March discussion with analysts, Massimo D'Amore, CEO of PepsiCo Beverages America, outlined a plan for growth that includes Aquafina in bottles that use less plastic, relies on new ingredients like sweetener Reb-A and, most heartening to media firms, calls for TV advertising. In particular, D'Amore held up the relaunch of SoBe Lifewater, which involved Super Bowl ad buys on two separate years, as "almost our case study on how we're going to build brands in the future."

That said, Pepsi was conspicuous in its absence at this year's big game as it opted to instead put $20 million behind social media efforts, namely Pepsi Refresh, an online forum where consumers could submit to Pepsi their ideas about making the world a better place.

That effort aside, Sipper says he expects Pepsi and Coke will continue to lean on TV because it's what they know best. That seems to be the case. For instance, when Coke saw sales of Vitaminwater slide, it launched a TV campaign from Zambezi, a sports marketing firm in Venice, Calif., that positioned the enhanced water/sports drink as an elixir for hangovers. Likewise, TV was a big part of PepsiCo's current reinvention of Gatorade after that brand had suffered a downturn in sales similar to Vitaminwater's.   

A new Gatorade TV spot from TBWA/Chiat/Day, Los Angeles, promises that "in 2010, we're changing the game again"—a reference to how the sports drink became a favorite of big-name athletes not long after its 1965 debut. And even when Pepsi or Coke fully embraces social media with a new effort, there's usually a big TV component as well. For example, when Pepsi's Mountain Dew crowdsourced its next drink under its Dewmocracy program, the brand still relied on plenty of TV ads to get the word out.

Coke's and Pepsi's continued dependence on TV is good news for media sellers, especially since the two companies' dominance is pretty much assured. Beverages aren't like the tech segment, in which a company like Google can come from nowhere and become a major player. Most upstart bevs wind up selling out to one of the big players with an existing lock on distribution.

That's less true for the beer category (it's easier to launch a microbrew than an energy drink), but the industry is more dominated by giants than ever thanks to InBev's 2008 purchase of Anheuser-Busch and the merger between Miller and Coors that same year. The brewers fared better in the recession than their nonalcoholic compatriots. Even though consumers bought less beer in 2009, the companies were able to prosper by raising prices 4 percent to 5 percent. That meant that advertising spends also remained level (the category's outlay rose 0.9 percent, per TNS). But Benj Steinman, publisher of "Beer Marketer's Insights," says the brewers won't be able to rely on a price hike this year.

Instead, they will hope, along with everyone else, that a recovery will take hold in 2010.

Says Steinman: "It seems to be getting better, but it's still too early to say."




Consumer Packaged Goods: Supermarket Staples Step Up

By Elaine Wong


Packaged-goods companies got through the worst of the recession by emphasizing value in their marketing. Now, going into the upfronts, they're looking for value themselves.

Forget about what the top economists are saying; when it comes to negotiating TV buys, CPGs insist that times are still tough. "The networks may ask for single-digit inflation in their rates. However, since the economy continues to be soft, we believe any inflation is unwarranted and expect lower media prices," says Marc Fonzetti, who oversees integrated media services for Reckitt Benckiser North America.

That, at least, is a switch from last year when many CPGs waited until the last minute to purchase scatter in hopes of inking recession-friendly deals. "It was almost a case of 'Who wants to blink first?'" says Brett Groom, vp, media, digital and social marketing at ConAgra Foods. According to Groom, clients were thinking, "I don't want to take a 5 percent discount if I can get 7 percent," and the networks, meanwhile, were disinclined to budge. In the end, food and nonfood titans sliced network TV spending by 16.6 percent to $3.4 billion, according to Nielsen. (The data excludes online ads and beverage spending.)

Now, as the economy recovers, marketers and TV networks are looking at much more normalized-and higher-upfront pricing. Even scatter is selling at a premium rate. At the same time, the CPG business is bouncing back, and the top players are looking to wrestle share from private label, drive traffic to stores and pique consumer interest in new product launches. The innovation pipeline is certainly ramping up, says Ali Dibadj, a New York-based analyst for Sanford C. Bernstein.

The upfronts this year are going to be "a little different, not only from the magnitude of spending, but also from another dimension. There's a lot more focus—at least in the [household and personal care] world—on innovation," Dibadj says. And they're no longer value, or play-it-safe line extensions, but "innovations that could make your life even better," he adds.

Procter & Gamble, for one, has rolled out a bevy of new product launches, including Venus Embrace's "five-bladed disposable razor," and Pampers Dry Max with a "20 percent thinner," more absorbent material. Shampoo brand Pantene is also set for a major restage this summer.

Food marketers, who fared better as consumers traded dining out for more affordable, convenient foods, are looking to prolong their success despite an improving economy. "We think the [upfront] market is going to be solid. Demand is firming up," says ConAgra's Groom. "We'll spend a bit more in the upfronts as we continue to grow our media budgets." The maker of Chef Boyardee and Reddi-wip profited not only from TV buys, but also from deals that provided integration into programming. When launching Alexia crunchy snacks last year, for instance, the food giant bought time on Bravo's Top Chef.

"We thought the Alexia brand linked well and had similarities with Top Chef's brand essence, so it gave us an opportunity to have a deeper partnership with" the network, says Fernando Arriola, ConAgra's senior director of media.

Of course, these days there are vehicles other than TV to drive demand. Marketers, says Bernstein's Dibadj, will continue investing more ad dollars in online and in-store marketing, though not necessarily at the expense of TV spending.

Take Reckitt Benckiser. The Parsippany, N.J.-based household, food and personal care products maker last week announced that it was shoveling $40 million into Web video advertising this year. That's double the amount the company spent in this same channel last year, though this year's buy is also global, it says. TV, however, is still a big part of the mix. "We consider our digital investment to be a very efficient complement to traditional TV and will aggressively expand this model globally," Fonzetti says. New this year will be an "increased focus on metrics and multiscreen," he adds.

Consumer products giant Unilever, meanwhile, is entering the upfronts with a model it pioneered three years ago. Known as the "reverse upfronts," the procedure calls for bringing in TV ad sellers to familiarize them with the company's major brand marketing plans.

Last year's approach involved a "speed dating" meeting held at WPP-owned Mindshare's media-buying offices. Network representatives essentially went from "room to room to hear about [brand managers'] new initiatives. We expect to do something in a similar fashion to keep [things] fresh for the 2010-2011 upfronts," says Unilever North America media director Rob Master.

Though he won't disclose what the company's plans are just yet, he says the networks should keep in mind that "all of our brand managers are seeking innovation, flexibility and value."     





Fast Food: They're Lovin' It

By Noreen O'Leary


Television had a super-sized reason to be thankful for fast-food restaurants last year. The QSR chains were among the few to actually increase the money earmarked for ads on the tube, upping their spending by 2 percent over 2008. And little wonder: With so many American households squeezed in a financial vise, low-priced junk food wasn't just convenient, it was an economic imperative.

Overall, fast-food restaurants ponied up nearly $4.1 billion on TV advertising last year, according to Nielsen. but not everyone benefited equally. The lion's share of the money (36 percent) went to spot TV, followed by 23 percent for the networks. Cable was the third most popular advertising outlet for the industry, capturing 21 percent of spending.  Just as consumers abandoned expensive restaurants for burger joints, though, fast-food advertisers eschewed high-priced prime time in favor of cable and syndication. Network ad spending actually fell by 9 percent as $100 million fled from broadcast into cable, and syndicated spending rose by $14 million, per Kantar Media.

Last year was a big one for new product introductions: Yum Brands' KFC made its largest product launch ever with Grilled Chicken and McDonald's backed its gourmet espresso-based McCafe beverages with one of its biggest marketing pushes since the 1970s. But with the recession in full effect, the biggest message was value. With low prices as a selling point, fast feeders shifted their marketing focus from urban hipster havens like MTV to more family-oriented networks like A&E and Nick at Night. Category support of sports programming alone rose about $57 million. The message was clear: If you've got a family to feed and only a few bucks in your pocket, fast food is your new best friend.

But there was another reason for the shift. Youth—traditionally the bedrock demo for quick-service chains—are ordering fewer burgers and fries. According to research firm Sandelman & Associates, a staggering 49 percent of men aged 18-34 said they were visiting fast-food joints less often than they did in the fall of 2008. What's more, 41 percent of the fast feeders reported that, even when the kids did show up, they spent less.

Why? Maybe because they were broke. "The industry has always focused on the 16-34-year-old male-and those people have really been hurt," says Jeff Davis, Sandelman's president. "It's a big deal."

Last year, U.S. unemployment among the young (which the government defines as people aged 16 to 24) hit a postwar high of nearly 47 percent. In the fast-food industry, there's a direct correlation between unemployment and same-stores sales. But even consumers who had jobs have been cutting back. In Q4, as American unemployment hovered around 10 percent, the amount of fast food eaten at work dropped 12 percent, according to NPD.

Recessionary gloom aside, the news is not all bad, especially as 2010 unfolds. Media execs say that fast-food advertisers have been very active in the scatter market, which is good news for the networks in the coming upfront season. What's more, fast-food chains are making their numbers again. "We're now seeing positive same-store sales for the first time in 11 months," notes NPD restaurant analyst Bonnie Riggs. (Still, she cautions, "It's going to take a year, a year and a half, to recover from this recession.")

More revenue means, of course, more money with which to buy commercials, and fast feeders have lots of new products they want to feature on them. Take specialty beverages. McDonald's is launching new McCafe Frappe blended ice drinks and smoothie drinks, which will be backed by national advertising this summer. Burger King is entering the category, too, as it starts to feature Seattle's Best Coffee. Last month, Taco Bell introduced Limeade Sparklers, a lemon-lime soda, made with real lime juice and natural fruit flavors.

New products like these aren't just likely to boost store traffic. They signal the chains' determination to refine their brand identities—an effort that requires TV spots as part of the push. The industry is expected to gradually back away from steep discounting, betting that recession-weary consumers will be looking for new offerings, not just the cheapest things on the menu.

Good news for TV, right? Well, mostly. The lure of Web-based marketing still threatens the fortunes of TV in the fast-food category, much as it does in just about every other segment. As Darren Tristano, evp of food industry research firm Technomic, predicts, "We'll see more emphasis in social media."

But fast food has long relied on TV to get its messages out and most likely will keep the tube as its focal point, even as it increasingly uses cross-platform offline and online strategies. "Fast-food companies tend to rely on TV; it's so broad and has the mass they require," says one network buyer. "They also need it to reassure franchisees and support them."     




Financial Services: New Regs Tie Marketers' Hands


By Karen J. Bannan

What do you do when the president of the United States signs a new law into effect that completely changes the way you do business? If the current credit card industry environment is any indication, the answer is: Circle the wagons and focus on your existing customers.

Last May, President Obama signed the Credit CARD Act of 2009 (the acronym stands for "Card Accountability, Responsibility and Disclosure"). Among its reforms: limiting rate increases on existing balances, curbing marketing and card issuance to people under the age of 21, and addressing over-limit fees and charges for specific forms of bill payment. At first blush, restrictions like these would prompt many marketers to tear up their playbooks. After all, credit card companies have seemingly trained their sights on ever-younger consumers with each passing year. Yet even with the under-21 crowd now off limits, industry watchers predict there are still future prospects—if admittedly low-end ones—milling around in the Gen-Y crowd.

"American Express is offering Zinc and targeting it at young people," says John Ulzheimer, president of consumer education for Credit.com. "Even though the Card Act restricts marketing to under 21, it doesn't restrict marketing to twentysomethings, who are going to be the credit card consumers of the future.

This isn't going to subsidize the cost of [the Act's] compliance, but it's low-hanging fruit."

Still, it remains to be seen how the 2009 reform law—the ripple effects of which are lapping ashore only now—will affect upfront spending. Ad spend for the category was already down 18.3 percent last year, according to Kantar Media. Credit card spending for national television ads was down 30 percent, according to Jon Swallen, svp of research, with some companies taking hatchets to their budgets. Capital One, for example, spent $210 million in 2008. Its ad spend in 2009 was $110 million. Citicorp's drop was even more precipitous: $25 million in 2009 down from $215 million in 2008. "It's hard to foresee a scenario where you'd see a huge turnaround in budgets, or where companies would be increasing television budgets," he says.

Indeed, it's hard to foresee much of anything. The law's new consumer protections went into effect on February 22 of this year, and as a result, credit card companies are still scrambling to get a handle on marketing programs in this new credit environment. What's more, thanks to recent news like the SEC's civil filing against investment bank Goldman Sachs for "fraudulent misconduct," many consumers hold banking and financial firms in low regard—an image problem bound to impact marketing decisions and funding alike.

"The base of expansion of credit card activity has got to be less than in previous economic expansions," ventures Ed Friedman, director at Moody's Economy.com. "It's a new world, so it's fairly clear that the banks will not be able to count on the type of profitability they did in the past."

"It's a tough business," Swallen says, "And it's has gotten a little more difficult with the new regulations. They will impact the revenue side, which will impact the amount of money credit card companies can spend on marketing."

So far, though, the new law hasn't hurt the companies financially. American Express, Capital One and Bank of America have all posted profits in Q1, and all of the Big Six card providers have repaid their Troubled Asset Relief Program (TARP) bailout money.

But the new regulations are changing the way people market, says Swallen. Credit card companies (at least in the short term) will likely focus on squeezing more money out of their existing customers. "Two years ago a lot of credit card marketing was targeted at new account acquisition," Swallen says. "But today, companies want to identify and nurture more profitable customers. We can expect a greater amount of their budgets will go to direct mail with targeted offers for existing customers and less focus on traditional media, including television."

The focus on the customer is definitely something Discover is committed to, according to Julie Loeger, svp, brand and product management. "The goal is to continually talk to the card member," she says, adding that Discover will reinforce its rewards program and that it doesn't charge annual fees. How? A new microsite is on the way, but "no channel is out of play right now," Loeger says.

Programs are also changing. In the past, zero percent balance transfers may have been the norm. Today, companies such as Barclays, Capital One and JPMorgan Chase are hawking cards that offer membership perks. Capital One's offering is a double reward miles card; JPMorgan Chase has been touting its Sapphire rewards card. Finally, with cards like Barclay's Visa Black, banks are also offering more options for high-income customers, the top 1 percent of wealthy Americans.
 
Granted, this crowd only accounts for 4 percent of all credit card spending, according to Tower Group. But with the days of preapproved cards for high-school kids now over, every existing customer is worth his weight in...platinum.    




Movies & Entertainment: The Romance With TV


By T.L. Stanley

That movie studios will spend the lion's share of their marketing budgets on TV is one of those industry truisms roughly as dependable as Tom Hanks' drawing power. And while this year is bound to be no different, it's worth noting that Hollywood's marketers have fallen in love again with a proven outlet for their hit movies: the cross-promotion.

Case in point: the spate of promos surrounding Sex and the City 2. A lucky winner will get a shopping spree with Patricia Field, the costume designer responsible for keeping Carrie Bradshaw and her gal pals wrapped in designer brands like Alexander McQueen and Christian Louboutin. Fans can also order "couture cocktails" named after their favorite characters or simply buy bottles of limited-edition movie-themed alcohol and mix them at home. It's all courtesy of a deal between Warner Bros. and Skyy Vodka that pulls ordinary moviegoers into the cosmo-sipping culture of a franchise that's aiming to continue its successful streak when it debuts on May 27. Support for the deal will include bar and restaurant promos, print ads, Web sites, and social media. Skyy's director of PR and events, David Karraker, says the deal "gives people a way to touch and feel the movie."

That's something that TV ads don't give, which explains why integrations are popping up more frequently. The Skyy/Sex deal also illustrates a few tenets that are near and dear (and mandatory) for marketing Hollywood movies these days: pool your money (promotional partnerships with major brands are gold) and create real-world experiences (high-concept, low-cost and with a social media component) that lets fans dig deep.

The reason for this approach is simple. The American consumer isn't the only one who's been tightening his belt in the lingering recession. Hollywood's heavy-hitter studios, which spend more than $4 billion annually to market their flicks, have been shaving their ad budgets and whittling their release schedules for the past few years. They're increasingly turning to grassroots events, guerrilla marketing, and digital and social media to make a splash for a pittance.

"Hollywood loves nascent technology; it's very effective for driving PR," says Gordon Paddison, founder and principal of marketing firm Stradella Road and former New Line Cinema executive. "But for it to really work, it has to be integrated into the overall campaign. And it needs to have a twist and a way for people to interact."

Studios cut ad spending by 8 percent last year, to $4.39 billion, according to Bernstein Research. More cuts are expected this year, but probably not on tentpoles like Paramount/Dreamworks' Shrek Forever After, Warner Bros.' Harry Potter and the Deathly Hallows and Disney's Tron: Legacy.

TV spending in fourth quarter fell 7 percent, Bernstein reports, though it's easy to understand why studios continue to devote the biggest chunk of their marketing budgets to it: There's nothing else to match its mass exposure. But it also costs more money for fewer eyeballs. As people spend more of their time with social media, they've also become choosier about what they watch on TV.

Consumers are skipping more commercials than ever. According to the "MovieGoers 2010" report from Stradella Road, 61 percent of moderate-to-heavy moviegoers in their 30s have DVRs, 71 percent fast-forward through commercials and 55 percent say they almost always skip the ads.

No one would leave the fate of a potential blockbuster to an augmented reality stunt, a brand integration in a TV show or a Twitter feed, so the mega-money traditional TV, print and billboard campaign is far from dead. But it's no wonder studio marketers are looking at cheap, and sometimes free, alternatives. Iron Man 2's director Jon Favreau has used his Twitter account to leak tidbits about the much-anticipated superhero sequel to his fanboy followers, snagging mainstream media coverage of every "secret" he shared.

Disney/Pixar has launched a screening program to show college students the first 65 minutes of Toy Story 3—a "cliffhanger edition"—to spark interest and blog posts. These students, most of whom were children when the first Toy Story movies were released, get into the screenings by signing up on Facebook. The studio just named a new nonentertainment industry marketing chief, M.T. Carney, a brand strategist who reportedly preaches the idea that communications don't have to be tied to ad buys.

The combination of traditional and emerging tactics is definitely working this year. Box office is up 9.4 percent from last year's record-breaking run to $3.2 billion, partly due to the proliferation of 3-D movies and their premium ticket prices. The top three movies of early 2010 were released in 3-D: Alice in Wonderland, How to Train Your Dragon and Clash of the Titans. First-quarter box office broke records with a $2.65 billion take, up 9 percent over the same period in '09. Attendance, a real bellwether of success, is up 7.2 percent, according to Hollywood.com, which bodes well for the summer blockbuster season and beyond.     




Pharmaceuticals: Racing the Patent Clock


By Jim Edwards

Dinosaurs Roam the earth in the prescription drug category: Old brands, some on the verge of extinction due to patent expiration that will end their rights to market exclusivity, are increasing their giant TV spending budgets in a last gasp before they die.

By rights, a massive shift in media dollars ought to be coming at TV's expense as more ad dollars flow to the Internet, where marketers know consumers turn first to search for information about health issues. But a combination of circumstances has conspired to keep dollars pouring into TV, including:

• Regulatory uncertainty at the FDA as the government reviews online ad rules

• The declining efficacy of sales forces as more doctors close their doors to sales reps

• The aforementioned "patent cliff," which has increased the overall TV spend

• A lack of new blockbuster drugs because the industry is a victim of its own success. Treatments to many "profitable" diseases are already out there, industry insiders say.

In 2007 and 2008, budgets decreased in part due to the recession but also as companies pulled in their horns while they waited for healthcare reform to shake out. Last year saw the first increase in direct-to-consumer drug advertising since 2006. Budgets were up 4 percent to $4.8 billion in 2009, according to Kantar Media.

That pattern will likely continue in 2010. TV-only spend jumped 2 percent in 2009, according to Nielsen. The increase was unexpected because some blockbuster drugs are no longer being advertised since their patents ran out. Sanofi-Aventis' Ambien and Ambien CR have both blinked out of existence in recent months—once upon a time they had $100 million-plus budgets, just for TV. Those sleeping pills were preceded into oblivion by Merck's cholesterol pill Zocor and AstraZeneca's heartburn treatment Prilosec (whose OTC marketing rights were acquired by Procter & Gamble).

The increased spend comes from the remaining big soon-to-be-extinct brands. Pfizer's cholesterol drug Lipitor, which goes generic in 2011, therefore losing the bulk of its ad budget—boosted its spend 149 percent to $184 million in 2009. It's the same story with Viagra, which goes off-patent in 2012. Its 2009 budget rose 5 percent to $101 million and will likely remain in that area for 2010.

The reason is simple: Many of the larger drug companies—Pfizer, AstraZeneca, GlaxoSmithKine and others—realize that they have a rapidly closing opportunity in which to squeeze every last drop of sales from these tyrannosaur brands. Other brands whose spending is likely to remain strong in 2010 include Nuvaring (Merck), Celebrex (Pfizer), Abilify (Bristol-Myers Squibb) and Cymbalta (Eli Lilly).

"I think it depends on the individual brand. Some may absolutely take that strategy, go gung ho, we've got three years left," says Shari Wolfson, group managing director, mcgarrybowen in New York, which handles Viagra and anti-smoking drug Chantix for Pfizer. "For other brands, it may make sense to take the opposite route, to pull back and be much more efficient and restricted."

One of the factors preventing drug companies from moving dollars off TV is the FDA. In 2009, the agency sent warning letters to 14 different drug companies, chastising them for using Google search ads that didn't include warnings about risk and safety information that all drug ads must have. Since then, the FDA has started a review of its regulations for online and social media, but the new rules won't be out for months. That leaves companies in limbo: They don't know what's right and wrong on the Web until the FDA tells them. The rules for TV, however, are clear-cut and well understood. For many marketers, it's an easy default.

Lastly, TV will likely be the beneficiary of two mega mergers in 2009—Pfizer's acquisition of Wyeth and Merck's takeover of Schering-Plough. The consolidations resulted in the sacking of more than 25,000 drug sales reps. The industry as a whole has laid off thousands more from its sales forces as patents have expired. On top of that, many doctors now refuse to see reps after a series of recent scandals. With dwindling opportunities in the doctor's office itself and ebbing sales-force effectiveness, TV now looks like a decent alternative for brands.

"We're seeing continued restricted access to physicians," says Euro RSCG Life worldwide managing partner Donna Murphy. "So because of that, it's driving cross-platform awareness to other directions such as digital and broadcast, etc.

The dollars are shifting in the mix. It's driving to nonpersonal promotion and selling." TV should enjoy the last throes of its Jurassic era: Both Murphy and Wolfson say companies will come to grips with online media as soon as the FDA lets them, and those patents will run out, sooner rather than later.    




Retail: Let the Deal Making Begin


By Robert Klara

Just in case you TiVo'd your way past it, an interesting ad made its debut on April 22. After a 14-year absence, Barnes & Noble aired a 30-second TV spot. Was it to tout 20 percent off publishers' list prices? More of that friendly neighborhood bookstore stuff? Hardly. The ads were for the Nook, an e-book reader.

That a retailer chose an old medium to promote its new media product was something of an ironic twist—sort of like airline ads on the side of a bus. But for the networks, it was welcome news. After all, the retail sector has been retreating from TV advertising for some time now. The big question, however, is this: Now that the economy is inching its way out of the ditch, will retailers return to the days of fat budgets earmarked for TV time?

That depends on who you ask, but at least some analysts are sounding optimistic again. Last year marked a period of marketing austerity for retail, which spent $185 billion on television ads, a 5.4 percent drop from 2008, per Nielsen. In fact, 2009 was the third consecutive year of declines in TV spend for retailers, per TargetCast. Translation: Don't blame the recession because this cool-off started long ago.

Not that the recession didn't have a lot to do with the cutbacks. "There's a direct correlation between the diminished ad dollars for TV and the decline in retail sales," notes Marshal Cohen, chief industry analyst for the NPD Group.

"That both dropped by about the same amount is not a coincidence." As Mike Gatti, executive director of the Retail Advertising & Marketing Association, puts it: "The recession was a big deal."

But Gatti adds that "there's another piece to this—the shift to new media. Ad budgets aren't any bigger, but there are more places to get ROI." Specifically, social media and other online platforms that allow retailers to both tailor the messaging and deliver it for less money. "TV still dominates, but marketers are trying to better balance where they spend with where consumers spend their time, which means less on TV, more on online," observes Shar VanBoskirk, vp and principal analyst for Forrester Research. According to Forrester data, 62 percent of advertisers (including, but not limited to, retailers) believed that TV advertising was less effective than it was two years ago, while 77 percent said they planned to shift their TV ad budgets to investment in social media in 2010. Ouch.

Data from the National Retail Federation further charts that loss of faith. Its latest Retail Horizons report shows 42 percent of retailers spent no money on TV advertising in 2009, while 58 percent wound up spending less because they were diverting monies to the Web and other media that furnished "more personalized consumer contact."

Does this mean that TV is on its way out? No. Even though consumers are increasingly "multichannel" in their daily lives, the amount of time Americans spent in front of the tube each week was actually the same last year as it was in 2004 (13.1 hours), according to Forrester. And it's not like CBS didn't sell all of its Super Bowl spots.

"TV is absolutely not dying," VanBoskirk says. "Our data shows that marketers are shifting dollars away from traditional media, but the primary channels being sacrificed are magazines and newspapers." Cohen adds that while retailers are indeed interested in marketing via the social Web, "they're just starting to dabble in it and understand what the Internet can do in creating a more effective mix of marketing." In other words, TV is the medium retailers understand and feel comfortable with, and that's hardly an insignificant consideration.

What's more, early signs show that TV advertising is rallying faster than many other parts of the economy. TargetCast data show that, in January and February of this year, retail category spending on TV increased 30 percent for the year-over-year-earlier period. Early 2010 has already seen the debut of large new campaigns from retailers such as Lowe's and Lane Bryant.

So what's in store for the unfolding upfront season? Industry watchers are mixed in their predictions, but most are sounding notes of optimism, if tentative ones. Joseph Feldman, senior retail analyst for the Telsey Advisory Group in New York, thinks that "we'll see a little more spending toward TV advertising.

Retailers are cautiously optimistic, and everyone seems encouraged by the recent uptick in sales over the past few months."

NPD's Cohen also predicts an ad-spend increase for retail, but "a less-than-proportionate balance. If sales bump up by 5 percent, don't expect ad dollars on TV to go up 5 percent. [Retailers] will increase the budget but across a wider variety of media."

For his part, Gatti of the Retail Advertising & Marketing Association fears a dip in TV ad spending—"a little bit," he says, "but just because we're going to continue to see this shift into new media. I don't think the bottom will fall out though."




Technology: Primed for a Global Reboot

By Karen J. Bannan


Like many  industries, tech took its lumps in 2009, which research firm Gartner called "the worst year ever" for the category. Worldwide IT spending fell 4.6 percent as consumers and businesses instituted spending freezes, though things improved a bit in the fourth quarter. Many expect the tech sector to show its resilience in 2010—which many IT marketers are calling "the year of the refresh."

Analysts, experts and marketers are—you guessed it—cautiously optimistic. "The economy is coming back and we see marketers spending more time thinking about what they're going to do," says David Cooperstein, vp and research director at Forrester Research. "If you look across the board, people are definitely increasing their ad activity." Cooperstein credits pent-up IT demand and new product launches that help businesses do more with less.

Indeed, since in 2009 there were nearly 175,000 job cuts and a mere 24,214 new jobs created, that translates to IT departments with fewer people, according to executive recruiting firm Challenger, Gray & Christmas. But even that may be changing as announced tech hires in the first quarter of 2010—9,718 jobs—means the industry is already 700 ahead of its 2009 totals.

Meanwhile, cuts are significantly fewer with only 22,338 job losses in the sector between Jan. 1 and March 31 of this year.

At the same time, Gartner is calling for double-digit increases in spending for both computer equipment (11.1 percent) and software (10.5 percent).

Communication equipment sales for the enterprise will grow 7.2 percent, according to Gartner. A big part of that push is the enthusiasm and adoption of cloud-based services and virtualization designed to help businesses reduce on-premises equipment and software.

Will that push for new business include TV advertising? Not necessarily. Tech users, of course, are already pretty Internet savvy, so the category was one of the first to migrate its advertising online.

For instance, years ago, a company like chipmaker AMD used to run a fair amount of TV spots, but now, "We're doing very little television advertising since our focus is supporting our partners," says Nigel Dessau, AMD's svp and CMO.
 
Nevertheless, there's still a big chunk of the tech business that's aimed at consumers and still relies on TV advertising, particularly that ongoing war between Apple and Microsoft.

But the convergence between traditional computing and mobile could spur some additional spending as well. Case in point: Apple's iPad, which has prompted the usual big TV buy from Apple, but will also likely compel telecom carriers who are working with makers of other mobile devices to use the medium to tout exclusive relationships with those device makers.

"It's hard to talk about device manufacturers without also talking about providers," says Jon Swallen, Kantar Media's svp of research. "It's a fine line because many of the [handset] manufacturers are working in concert with service providers so we're increasingly seeing Samsung, Motorola and LG striking exclusive deals. In effect the marketing budgets for a lot of the device manufacturers are extended, but we're seeing a change where these companies are also driving their own consumer demand for their latest gadgets."

However, it's not clear that all this activity will mean anything when it comes time for upfront spending, say marketers and analysts.

Even though many were forced—after sitting out of last year's upfronts—to buy at higher scatter market pricing, marketers are still taking a wait-and-see approach.

"Clearly, Apple is going to continue spending a lot of money on iPad advertising, and there was also a Windows 7 launch that continues to have a big impact on marketing spend in the category," says Cooperstein. "But that doesn't mean that money is going to be allocated to television alone." Indeed, tech, more than other categories, is likely to pave the way for cross-platform deals.

Chris Kindt, director of media and marketing for Sony Electronics, which sat out last year's upfront market and bought scatter instead, says he's focused on TV, but unsure if the company will participate in this year's upfront market.

"We know we're going to be buying TV, but we're going in with eyes open and doing a lot of research," he says. The company's strategy—a mix of 70/30 broadcast to cable—will depend on the kinds of integrations being offered and how quickly supply is moving, he says. Kindt will be looking for "organically ingrained product placement" deals as well as advertising packages that include product placement, television and Web elements.

Says Kindt: "If we're buying [Fox's] Fringe, we want the show to come to life on its Web site, too."    




Telecommunications: Upwardly Mobile Ad Budgets

By Mike Shields


The telecom industry continued defying gravity in 2009. While overall media spending fell 9 percent, telecoms increased their spends 4 percent or 5 percent, depending on who you ask. This upfront season looks similarly rosy thanks to a little innovation, some new competition and an old-school ad war.

The growth in advertising spending persists even though wireless has become a mature category. By now most Americans have a cell phone—or two—meaning that category leaders like Verizon, AT&T, Sprint and T-Mobile are left fighting for finite market share and trying to poach each other's customers. Mobile phones are "as close to becoming as ubiquitous as the refrigerator," says Roger Entner, head of telecom research for Nielsen. "It finally happened. We are running out of people."

But marketing wireless phones isn't like trying to sell Frigidaires. Constant technological innovation and slicing and dicing of the market ensures that there are lots of new things to advertise.

The recession, for instance, ushered in growth for a slew of prepaid phone companies like MetroPCS and TracFone. And of course, a company called Apple has raised the bar so much in terms of what people think a mobile device is supposed to do. That's led to skads of new handset devices and the promise of new advertisers this year—think Dell, Lenovo, HP and maybe even Google, which is promoting its Android mobile operating system as an alternative to Apple's iPhone.

A combination of factors also led to an ugly and expensive ad war between AT&T and Verizon which spilled out to the courts (although an AT&T lawsuit has since been dropped). In AT&T's case, the company enlisted Luke Wilson to convince Americans that Verizon's "There's a Map for That" ads were off base—dialing up the intensity further (though that Wilson campaign is now over).

Jon Swallen, svp, research, Kantar Media, says we're seeing a replay of Coke and Pepsi's or McDonald's and Burger King's battles. "The characteristics of the wireless market provide all the classic ingredients of a very competitive category," he says. "It's like the burger wars or soda wars of old."

Thus, going into the TV upfront, many expect wireless carriers will be active spenders. As Jeff Kagan, an Atlanta-based telecom analyst, puts it: "These companies cannot afford to have a bad year." And for the past two years, TV has made up over 60 percent of ad dollars, something analysts don't see changing.
 
Even as digital has jumped as a percentage of spending in the category—from 4 percent in '08 to 12 percent in '09, according to Kantar—it appears to be siphoning dollars from print, not the tube. According to Nielsen's Entner, between 50 million to 60 million Americans are in the market to switch carriers each year, and in the minds of these carriers, the best way to reach that mass an audience is TV—especially network TV.

More recently, among the top players, Sprint has struggled mightily, which has impacted its advertising output, but not enough to drag down the category. Plus, third place T-Mobile is rarely in the spending neighborhood of the behemoths Verizon and AT&T, and that is unlikely to change in this coming upfront. "There has been clear separation in ad budgets over the past five years," says Swallen.

"Verizon and AT&T have clearly distanced themselves. [And given Sprint's woes], it's more like three and half companies in the category."

The turf wars among those three and a half companies will probably fuel continuing growth in advertising budgets.

At the moment, there doesn't seem to be a game changer on the horizon. For instance, those prepaid firms will remain regionally rooted niche players no matter how well they fared in the recession, analysts say.
 
"Prepaid is still very, very small relatively," says Swallen.

Likewise, although ad spending by mobile phone device makers rose 120 percent in 2009, per Nielsen, the whole category spent $783.6 million, which is far less than either AT&T's or Verizon's outlay.

Still, hardware tends to be a big factor in new customer acquisitions, so expect to see a lot of mobile phone ads in the coming year.

"New competition is raging," says Kagan. "The category is very loud and very congested, and these new guys have to get their messages out. Smartphones and data plans—that is where the growth and revenue is going forward."

Yet not everyone agrees. Some analysts cautioned against overhyping the smartphone market, which is still a relatively small segment. Plus, as mentioned, those hardware makers don't yet have the ad budgets to keep up with the likes of Verizon and AT&T—few do in any category.

"I don't see anybody changing the trajectory," said one analyst. "This is a three [billion] or four billion dollar category. Even what Apple spends is a drop in a bucket."