Business

AD SPENDING WOES WORSEN

Madison Avenue is bracing for the worst ad slump since 2001 as a drop-off in consumer spending is likely to lead marketers to rein in their budgets.

The anticipated drop in spending in 2009 comes on the heels of a slight decline in 2007 and a more noticeable dip so far in 2008, according to industry data.

Madison Avenue, which is about to celebrate Advertising Week here in Gotham City, has plenty of reason to worry. Advertising tends to be one of the first places companies look to cut in tough times, leading to layoffs and consolidation.

“No one knows the implications on corporate America of what transpired over the last week,” said Miles Nadal, chairman and CEO of MDC Partners, whose agencies include Crispin Porter & Bogusky. “We still haven’t seen the bottom to all this.”

After last week’s Wall Street meltdown culminated in a massive government bailout, the ad business is trying to divine what the economic crisis means for consumers and advertisers.

Car companies had already slashed their ad spending, while travel, telecom and financial services were showing weakness.

Ad spending actually fell 1.4 percent in the first half of this year, according to recent figures from Nielsen Monitor-Plus, despite the strength of election year spending and the run up to the Olympics.

Now, forecasters who were bullish about an uptick in 2008 are grumbling about having to lower their forecasts yet again.

Although a few big marketers, including retailer Best Buy, have announced ad budget cuts, so far the industry hasn’t seen a widespread pullback in spending. One thing ad execs have noticed, however, is that clients are delaying making decisions.

“What you’re seeing now is clients who don’t know what they are going spend in 2009,” said Jeffrey McClelland, CEO and chief client offer at New York agency Cliff Freeman & Partners. “All the planning cycles are late.”

Traditional media is showing signs that it will experience a dip because of the recession-like slowdown. Meanwhile, Internet advertising, which many thought would sidestep any spending decline, is also feeling some pain.

Financial advertisers cut spending on Web banners and other display ads 27 percent in the first half of 2008, contributing to a 6 drop in the overall display ad category, according to Nielsen.

No one wants a repeat of 2001, when the dot-com bust and an economic slowdown caused ad spending to plunge 9.8 percent, according to figures from ad researcher TNS.

During that recession, widespread cutbacks led to layoffs at many agencies, including some closings, shrinking budgets for many TV and cable outlets and the failure of several print publications.

holly.sanders@nypost.com