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Axios
22-04-2025
- Business
- Axios
Tariffs hang heavy over ad market
President Trump's economic policies are starting to weigh heavily on the U.S. ad market, which was just starting to stabilize after years of pandemic-era volatility. Why it matters: In addition to economic turbulence, ad-supported companies face very difficult comparisons from last year, which will make it difficult for media and tech companies to meet previous growth projections. 2024 marked the fastest year of U.S. ad spend growth since 1983, per analysts at MoffettNathanson, thanks to the presidential election, the Olympics and AI-driven advertising advancements. Driving the news: The country's most prominent media and advertising analysts have started to forecast significant slowdowns in ad spend this year. Ad-buying giant Magna further reduced its 2025 advertising growth forecast last month, citing "the lack of economic visibility and a decline in confidence" that could impact marketing budgets. That followed a similar warning from Brian Wieser, a top advertising analyst, who believes the president's trade policies pose a more extreme threat to supply chains and corporate decision-making than previously expected. Media analysts at MoffettNathanson told clients in a note last week that slower GDP growth could result in roughly $45 billion in lost U.S. ad spend versus current forecasts. "Given the ongoing secular headwinds facing the linear TV ecosystem, we worry that television could mirror the fate of radio and newspapers during past recessions," they wrote. Zoom out: While economic uncertainty will impact the entire ad market, certain categories will be hit harder. Chinese retailers that typically spend billions of ad dollars on platforms like Meta and Google have dramatically reduced ad spending in the U.S., per eMarketer. Temu and Shein have reduced their daily average U.S. ad investment by 31% and 19%, respectively, between March 31 and April 13, per Sensor Tower. Automotive companies, facing production uncertainty related to tariffs, are expected to reduce marketing spend, per Magna. This is especially true for foreign auto companies that face 25% import tariffs. Auto advertising began to recover last year following a significant chip shortage in 2022 and 2023, boosting local publishers and broadcasters. Consumer packaged goods companies, as well as restaurants, tend to be the most vulnerable to inflation, which is expected to remain high amid economic volatility. Stubborn inflation makes it hard for the Federal Reserve to cut interest rates despite pressure from President Trump. Restaurants and personal services: The service economy is expected to pull back significantly on ad spend amid tariff exposure from their international supply chains and broader consumer concerns around inflation. Tourism and travel: President Trump's aggressive stance toward the country's reliable international trade partners threatens billions of dollars across the U.S. travel and tourism industries. The most significant drop off thus far has been from Canadian visitors, followed by tourists from European countries. Both groups tend to be reliable spenders. What to watch: While there are concerns about consumer discretionary spending in a recession, analysts are more bullish on subscription-based media services that are less dependent on advertising. Analysts at Macquarie last week said, following Netflix's positive earnings report, that the company's premium valuation "is likely supported by investor flight to safety." Experts also believe ad agency holding groups, such as Omnicom, Interpublic Group and WPP are better suited than some of their media clients to weather a possible economic downturn. "With highly variable cost structures, their earnings downside is somewhat cushioned, and multiples are already near historical troughs," analysts at MoffettNathanson wrote.
Straits Times
22-04-2025
- Business
- Straits Times
Tariff confusion leaves US advertisers ‘paralysed' and ‘sombre'
Hundreds of billions of marketing dollars are in flux as companies struggle to plan for tariffs — for some sectors, the timing 'couldn't be worse.' PHOTO: MIKEL JAS/NYTIMES NEW YORK - Persuading people to spend money in a time of unpredictable tariffs is proving to be a complicated calculation for the US$380 billion (S$495 billion) American advertising industry. Should a retailer commit to holiday television commercials for toys manufactured by newly vulnerable trading partners? How do social media companies account for the potential disappearance of Chinese companies that have spent billions of dollars promoting their wares? How does an automaker pitch vehicles that may cost consumers thousands of dollars more than they did a year ago? 'You're going to introduce uncertainty about how they make stuff, let alone what's going to happen to consumers in terms of their propensity to buy?' said Brian Wieser, a veteran industry executive who runs Madison and Wall, a consulting firm. 'That's going to cause advertisers to really curtail their ad spending.' Major companies were left in the lurch in April as the Trump administration declared new tariffs, soon imposed them, reversed course a few days later and then doubled down on targeting China. Now, those advertisers feel 'paralysed,' said Jay Pattisall, a principal analyst at Forrester, a research firm. Several companies declined to elaborate on their marketing strategies for the coming months or said they were in 'wait and see' mode. 'We are as in the dark about this as I think everybody else is,' Mr Pattisall said. 'It is such a volatile situation because the decision-making is quite volatile.' Companies' willingness to invest in marketing and promotion is often viewed as a proxy for the health of the global economy, a sort of indicator of whether gross domestic product might grow or contract. The tariffs could potentially trigger an economic domino effect, causing consumers to close their wallets, corporations to streamline their spending and marketing to take a back seat, several advertising experts said. 'In a world where a recession hits the US, advertising will be hit harder – even in a relatively mild and quick recession scenario,' analysts for MoffettNathanson, a research firm, wrote in an investor note. Some companies are circulating ads urging consumers to buy before the tariffs start pushing up prices. On Facebook, auto dealerships in California, Michigan, Utah and elsewhere told shoppers to 'lock in pretariff pricing before rates go up' and 'check out our tariff-free pricing.' A home goods merchant in Minneapolis offered discounts on vintage Chinese items 'in *celebration* of the tariff tirade.' Executives at Omnicom Group, one of the largest advertising agency groups in the world, said during the company's first-quarter earnings call on April 22 that it was waiting for some of its larger clients to signal how they planned to proceed with marketing spending when they announced their own earnings over the next few weeks. Omnicom also lowered part of its revenue forecast for the year. US President Donald Trump's unorthodox trade tactics have clouded the future for an industry that still leans heavily on planning. In a few weeks, industry executives will converge in New York City for the annual upfront presentations, where media giants like Disney, NBC Universal and Netflix show off their new TV and streaming offerings in hopes of locking in monthslong advertising contracts. Comic-Con International, a major event for pop culture marketing, is scheduled for July in San Diego. WARC, a research firm, downgraded its expectations for ad spending growth over the next two years by US$19.8 billion, explaining that 'the risk of prolonged stagflation – and outright recession – has grown in key economies, exacerbated by new trade tariffs.' Caution will reign for now, said Martin Sorrell, the founder of S4 Capital and a former head of WPP, one of the world's largest ad companies. 'Generally, the mood is going to be quite somber,' he said. As tariffs on foreign-made goods loom, some companies are advertising their American manufacturing bona fides. Ford Motor posted a video the day after the tariffs were announced that claimed the company employed the most hourly autoworkers and assembled the most vehicles in the country. The spot, which closed with the words 'From America. For America,' was promoted by Mr Trump on his social media platform, Truth Social. Trade volatility will force companies to seek out flexibility in advertising deals, allowing them to reallocate their budgets or pause ad campaigns partway through, several analysts said. Digital advertising, where messages can be quickly tweaked and results are easier to measure, will also help keep costs in line, they said. Publicis, a large French advertising agency group, acknowledged on April 22 that clients 'facing a very challenging situation' around tariffs and inflation could cut their marketing budgets. But after Covid-19 and a war in Ukraine, the firm and its clients are used to unpredictability, said Arthur Sadoun, the CEO, during a call with analysts about first-quarter earnings. 'Our clients are definitely cautious, but they are also very competitive, and they are looking for opportunities to grow despite the uncertainty,' he said. NYTIMES Join ST's Telegram channel and get the latest breaking news delivered to you.
New York Times
16-04-2025
- Business
- New York Times
Tariff Confusion Leaves Advertisers ‘Paralyzed' and ‘Somber'
Persuading people to spend money in a time of unpredictable tariffs is proving to be a complicated calculation for the $380 billion American advertising industry. Should a retailer commit to holiday television commercials for toys manufactured by newly vulnerable trading partners? How do social media companies account for the potential disappearance of Chinese companies that have spent billions of dollars promoting their wares? How does an automaker pitch vehicles that may cost consumers thousands of dollars more than they did a year ago? 'You're going to introduce uncertainty about how they make stuff, let alone what's going to happen to consumers in terms of their propensity to buy?' said Brian Wieser, a veteran industry executive who runs Madison and Wall, a consulting firm. 'That's going to cause advertisers to really curtail their ad spending.' Major companies were left in the lurch this month as the administration declared new tariffs, soon imposed them, reversed course a few days later and then doubled down on targeting China. Now, those advertisers feel 'paralyzed,' said Jay Pattisall, a principal analyst at Forrester, a research firm. Several companies declined to elaborate on their marketing strategies for the coming months or said they were in 'wait and see' mode. 'We are as in the dark about this as I think everybody else is,' Mr. Pattisall said. 'It is such a volatile situation because the decision-making is quite volatile.' Companies' willingness to invest in marketing and promotion is often viewed as a proxy for the health of the global economy, a sort of indicator of whether gross domestic product might grow or contract. The tariffs could potentially trigger an economic domino effect, causing consumers to close their wallets, corporations to streamline their spending and marketing to take a back seat, several advertising experts said. Want all of The Times? Subscribe.
