Ad spend declines for first half of year, digital growth slows

Advertising spend works as a bit of the canary in the coal mine in a lagging economy. When the market constricts, one of the first things to go is the ad budget. News showing a decline in overall ad spend for the first half of the year should make everyone uneasy (as if you needed another reason).

Taken as a whole, ad spend declined by 1.6 percent compared to 2007 according to TNS Media Intelligence. More troubling is the second quarter of this year, which saw spending declining by 3.6 percent. That’s the largest drop in ad spending since the dark days of 2001.

Digital was one of the few mediums to see an increase in ad spending, which was up by eight percent year over year. But before everyone involved in online starts getting too happy, let’s be frank: A sinking tide lowers all ships. There’s much to recommend digital advertising in a recession — mainly that it’s cheap and return on investment is much easier to prove. But growth rates are slowing. In 2006 and 2007 digital was up by 17.3 and 15.9 percent respectively.

This could simply be a sign that online advertising has reached maturity, and the days of rocketing growth are behind us. But at least one major advertiser seems to be getting skittish about digital. Auto giant General Motors pledged to shift half of its advertising budget online — a reported $1.5 billion in new money. But the ailing auto manufacturer, which lost $15 billion already this year, has seemed to pull up short of that, reducing its total digital ad spend.

Still, there’s two bright spots for the remaining months of 2008 that the TNS numbers don’t show — the 2008 Olympics and the presidential campaign spending. Whether that will be enough to offset losses in this economy remains to be seen.