Downturn claims 352 advertisers

Small, independent advertising firms have suffered badly in the downturn, having bared the brunt of a 50 per cent rise in the sector’s insolvency rate over the last year.

Like their media counterparts running TV and film companies, the number of advertising businesses declaring insolvency peaked in the first three months of 2009.

Although the rate of demise among advertisers slowed in the second quarter, more of them have gone bust since the summer of 2007 than any other major type of media company.

In fact, the last 24 months saw 352 advertising firms go under, representing 10 per cent more failures than in the publishing sector, and 25 per cent more failures than in the TV/film sector.

“In the main, we are seeing small advertising companies slide into insolvency,” said David Lancefield, partner at PricewaterhouseCoopers, which produced the figures.

“The contraction in advertising budgets is hurting all companies but currently picking off the small independents that do not have deep pockets or the ability to diversify.”

Similar to their TV and film bedfellows, advertising companies are reliant on a healthy stream of work coming through the door, partly because of long lead time from story board to screen.

As a result, Lancefield hinted such media practitioners were vulnerable, saying any pauses between contracts, or reductions in budget, potentially meant it was ‘lights out.’

In line with other advertising forecasts, PwC explained that advertisers focusing on digital and mobile media were the best placed to avoid the pinch from further belt-tightening.

Yet the immediate future looks challenging even for these players, the firm said. Over 2009/2010, online advertising will shrink at a projected rate of 3.2 per cent.

And while internet advertising should grow by 11.5 per cent in the two years from 2011, the UK advertising market in 2013 will be worth $3bn (£1.8bn) less than its value in 2007.

“The combination of a global recession and the structural shift towards digital platforms has accelerated the decline of some traditional media,” Lancefield said.

“The considerable growth in digital usage and revenues will not plug the gap left behind over the next few years.”

However as in previous downturns, fortune will favour the bold, PwC said, so media players should summon the courage to re-examine organisations, partnerships and pricing structures.

“Looking outwards for fresh insights and investing in new skills will distinguish those embracing digital future from those stuck in the analogue past,” the firm advised.

“Searching outside media sector boundaries for this stimulus is a must have. For example, experience from retail and financial services should inform how media companies should leverage the rich data that new media platforms generate."


 

11th August 2009

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