Why are ad sales slumping before the economy slumps? – Vox.com

Why are ad sales slumping before the economy slumps? – Vox.com

Not every truism is true, but there’s one for the ad industry that is pretty truthy: When the economy goes south, the ad market is the first thing to go.

The idea behind this one is pretty straightforward. If a company needs to cut costs, it’s much easier to get rid of ad budgets than anything else, like workers. So people in media have been trained to expect ad dollars to disappear in the wake of economic shocks. See, for instance, the Great Recession of 2008, when ad spending dropped by double digits in the following year. Or the spring of 2020, when ad dollars completely stopped for a few weeks while the world struggled to come to grips with the pandemic.

But now we’re seeing something different: For much of this year, in a variety of industries and media, the growth in ad spending has been slowing or stopping. You can see very obvious examples of this in public companies like Snap, which recently laid off 20 percent of its staff and blamed an ad market that had “substantially slowed.” Or you can ask someone who runs a privately held media company, off the record, how their business is going. “I’m glad I run a private company,” which doesn’t have to report its results in public, one of them told me this week.

But while the ad market is lurching, the general economy is … okay. Or, at least, mixed.

Yes, inflation is up, the stock market is down, and there are plenty of dire warnings about the future. On the other hand, the unemployment rate is pretty healthy, and even if consumers are spending less than they did at the height of the pandemic, they’re still spending.

What’s the reason for the disconnect, and what’s going to happen next? I’ve been asking people throughout the media and ad businesses. All of them agree that something unusual has manifested. None of them agree on the reason why.

So let’s run through some arguments:

Things are actually bad, even if the people around you can’t see that. And they’re going to get worse. So it’s better to stop spending now.

This theory both makes sense and is a little counterintuitive because it requires you to believe that people in charge of buying advertising are being proactive and not reactive.

But if you’re up for that: If your business involves selling expensive things that have become much more expensive because of inflation — like cars — or things that are much harder to make or get because of supply chain snarls — like phones and other consumer electronics — your business is already under pressure. You’re either having a hard time selling the stuff you have or you can’t get it in stock anyway. So …….

Source: https://news.google.com/__i/rss/rd/articles/CBMifGh0dHBzOi8vd3d3LnZveC5jb20vcmVjb2RlLzIwMjIvOS8yOC8yMzM3NTE2NC9hZHZlcnRpc2luZy1zbG93LWdyb3d0aC1lY29ub215LWRpZ2l0YWwtZmFjZWJvb2stYXBwbGUtc25hcC1wZXRlci1rYWZrYS1jb2x1bW7SAQA?oc=5

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