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Canaries & coal mines

10 Aug 2020  |  Dominic Mills 
Canaries & coal mines

If advertising is the developed economy’s canary in the coal mine, when will she start singing again? asks Dominic Mills

Last week, the U.S’s Q2 GDP figures came out; down 32%. It was a shock, although some pessimists had expected worse.

Other G7 country's figures have been, or are about to be published. The UK forecast is minus 19%; France, minus 14%; Germany, minus 6%; and China, a rare positive — up 3.2%.

In lock-step, adspend is falling too. Zenith expects Q2 global spend to fall 23%, the World Federation of Advertisers predicts a drop of 30%.

Generally speaking, and perhaps with a small lag, adspend levels rise and fall in line with GDP. The ratio may differ from country to country but broadly, in mature economies, it remains pretty steady.

Now a big question is this - is the link broken, or will it be restored?

Here’s an interesting study from 2014 from the WFA, which covers the APAC region before and after the financial crisis and shows how adspend recovered.

If we believe that adspend is a leading indicator of growth, then history shows that it will start picking up again soon. The caveat is that in modern times we have not experienced a downturn that encompasses both supply and demand.

Putting current and future job losses to one side, what then do the latest set of Q2 figures from Publicis, IPG, Omnicom and Havas (WPP reports later this month) tell us about the state of the advertising economy?

Of course, we should bear in mind that these titans have different exposure to different markets by geography and varying client bases, and then within that, differences in media, creative, digital and so on.

Nevertheless, if you want a rough snapshot, it’s worth looking at the organic revenue elements of their latest Q2 results since, in the round, they can be said to be representative of the industry as a whole.

The two best performers were Publicis, down 13%, and IPG, down 9%. Indeed, both Publicis and IPG shares rose after their results and have (as of 6 August) hung on to most of their gains. The reason? The figures weren’t as bad as expected.

Havas, more skewed to Europe, reported organic revenues down 18%, better than Omnicom, once the most reliable of the holding groups for churning out incremental improvement, which reported revenues down 23% - although there is a suggestion this was partly a result of a pricing mess-up in programmatic.

But nevertheless, Omnicom boss John Wren thinks the worst is over, even if there is no immediate rebound.

We shall see. It has not quite been the carnage I expected. Everything depends however on any second waves and the situation in the U.S.

Which brings us back to the headline. Advertising is the developed economy’s canary in the coal mine. Let’s hope it starts singing soon.

Microsoft gets a seat at the ads table

By the time you read this, the fate of TikTok in the U.S may be clear if Microsoft gets the green light from Donald to acquire it. The general view is that Microsoft is the least worst acquirer.

With one bound, Microsoft suddenly gets a lot cooler — a youth arm, if you like — and a seat at the digital advertising table. It’s a small seat, and way down the table of course — Bing, MSN and LinkedIn bring in chump change. But it’s a start and there will be those on the buying side who will be delighted to see a competitor to the duopoly.

The big ‘if’ is largely cultural though. Of various Microsoft attempts to crack the younger cohorts, only Xbox has had any real traction. And some of its acquisition efforts — Nokia and mobile, for example — have fallen miles short of success. And by culture, Microsoft is neither especially focused on either advertising or consumer markets, as opposed to B2B.

It’s ironic: not that long ago, Microsoft was considered the epitome of all that was bad about U.S tech. Now, compared to Facebook and Twitter, the sun is shining on it. There’s no way they would get anywhere near TikTok.

The catalogue isn’t dead quite yet

Argos’s decision at the end of July to kill off its catalogue, aka The Book of Dreams, prompted an outpouring of nostalgia, and understandably so. For a whole generation, the book had a totemic value.

For a generation of marketers too, catalogues had a similar position. Whole businesses were built on the direct marketing skills of catalogue distribution and, compared to today, what seems like rudimentary data analysis of response rates, couponing and postcode activity levels.

Catalogues were also a huge business for Royal Mail and spawned substantial spin-off businesses in financial services and credit, also requiring DM skills.

As the latest in a long line of retailers to dump print — Shop Direct/Very, Next and so on — it’s tempting to regard Argos’s decision as the final nail in the coffin.

But not quite. Some higher-end fashion brands still produce smaller version — Poetry and Boden, for example.

And there’s still one monster production alive from a global retailer that is thoroughly modern in every respect but one. I’m talking about Ikea.

Go to the bottom of this page and you will find an invitation to pick up a copy in-store. It must see something in catalogues others don’t.

I must admit I find it curious, but print catalogues have advantages their online versions don’t. Tactility is one, and a certain ease of use. Flicking around on a phone to find something and compare it — a kitchen clock, for example, a recent purchase in the Mills household — can be a faff. There’s also the constant presence and that flick-through quality to fill in random time gaps.

And Ikea has a glorious history of making the catalogue the centrepiece of advertising campaigns. Here’s a 2015 ad from BBH Singapore touting the advantages of a ‘bookbook’ over its online rivals: no cables, no batteries, a 7.5 x 8-inch interface (ie the page size) and tactile touch technology.

Even better, was this version from Ikea Switzerland, featuring the septuagenerian literary critic Hellmuth Karasek who reviews the catalogue with the same seriousness he would a work by Thomas Mann or Gunter Grass.

Karasek deadpans his way through  series of droll observations. “It could be criticised for more pictures than characters”, is one.

“You could say it is a furnished novel,” he adds, imagining a new literary genre, “and the characters are forced to crowd themselves between the furniture.”

Enjoy the ad below. Like the catalogues, we probably won’t see its like again.

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