Automakers continue to tighten ad budgets

For the first half of 2008, domestic automakers' ad spending fell 6.3 percent to $3.67 billion from the comparable period last year.

"Last year, the mood was brighter. Cautious, but far brighter," said Bob Liodice, chief executive of the Association of National Advertisers, whose members are marketing executives, product managers and related staff at 400 companies.

Over the past year, the economic downturn worsened as a housing slump became a crisis that has engulfed the financial services sector. Meanwhile, oil and commodity prices soared.

About 70 percent of ANA member companies that answered a recent survey are reducing their ad campaign media budgets and 63 percent are slashing production budgets.

Sanford Bernstein analyst Michael Nathanson said in a research note last month that he sees U.S. auto ad spending falling 16.7 percent overall this year to $15 billion, the lowest level in nine years.

Auto ad spending is not likely to change materially over the next 12 months, said Jim Peters, publishing and advertising analyst at Standard & Poor's.

"In tough economic times, it's all about justifying your expenses," he said.

Peters thinks the ad spending malaise could last longer this time than during the last downturn, in the aftermath of the Sept. 11 terrorist attacks.

Then, a single event drove the decline, and liquidity wasn't an issue throughout the economy as it is now, he said.

The American Association of Advertising Agencies trade group declined to comment on overall ad spending or the declines that research firms and analysts have reported.

As ad spending shrinks, smaller ad agencies will be hit harder than the big firms, which are more diversified geographically and in the businesses they serve, Peters said.

New York-based Omnicom Group Inc., the world's largest advertising conglomerate, posted an 11 percent increase in second-quarter profits from a year ago. Results were buoyed by strong showings in Asia, the Middle East, Eastern Europe and Latin America.

Strong sales in emerging markets boosted profits by 14 percent at London-based WPP Group PLC, the second largest advertising company globally, in the first half of the year.

The big players in advertising are "doing relatively well at the moment," Peters said.

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