Recession? We hope that's all it is.

The downturn is clobbering marketers, media, and agencies. Some won't survive.

Technically, the country is not in a recession yet. That's two successive quarters of gross domestic product decline. And second quarter '08 actually squeaked out a slight increase in GDP. But if this quarter and first quarter '09 see declines, October '08 will become the first month of a recession retroactively. Whatever this economic mess is called, times are tough.

The rich are always the last to be affected by economic downturns. In most cases they're not inconvenienced a bit. So when private jet orders are down, you know things are pretty bleak. And according to The Wall Street Journal, they're way down. So are sales at Cartier. Dior is closing stores, Bulgari is reining in expansion plans and Prada postponed its initial public offering.

Upscale brands are hurting all around the world. Louis Vuitton, Gucci and Bottega Venetta counted on growing demand for luxury goods in Asia to see them through the rough patch. But with China's stock market down 65% over the last year, those hopes are evaporating. Polo Ralph Lauren's upscale Moscow boutique isn't doing well. British Airways reports first class and business class passenger volumes off 9%. And London's Liv-ex Fine Wine Index fell 3.7% in September.

The economy is a disaster, and media, marketers and agencies are all feeling some serious pain.
Traditional media are losing advertising revenues. How bad is it? According to Goldman Sachs projections it's this bad for the traditional media.

  • Broadcast TV networks: -5%

  • Local TV affiliates: -9%

  • Radio: -5 to -10%

  • Outdoor: -5 to -10%

  • Magazine: -5 to -10%

  • Newspaper: -5 to -10%

  • Cable networks: -1%

For the first time, digital media are declining, too. Some examples:

  • Barclay's Capital cut its estimate of 2008 U.S. Internet advertising spending by 5.3%.

  • Nielsen Online reports a 6% decline in Internet display advertising this year. Borrell Associates predicts a 50% drop by 2012.

  • Borrell Associates predicts that paid search will peak next year, then begin to contract.

Of course a few media are still strong.

  • Direct response is up as marketers forgo brand building for immediate results. Pay-per-action is the main beneficiary of the trend, but direct mail and even direct-response TV are showing strength.

  • Point-of-sale is also gaining. Not surprising, since an Ogilvy Group study recently found that 30% of brand decisions are made in store.

  • And despite Borrell's predicted 2010 decline, paid search is still doing well today. Don't believe us? Bid on some key words.

  • Online video is still on the rise.

  • Social media have yet to prove themselves to be effective marketing communications tools. In a recent MediaPost interview with social media strategists (yes, that really is a job) at three large companies none was able to attribute a tangible sales benefit to their social media initiatives. But that hasn't stopped advertisers from increasing social media spending 55.4% last year according to Adweek. (See our previous post, Social Engagement.)

  • Third screen is beginning to take off. A Dynamic Logic AdIndex survey found that mobile phone campaigns generated an average of 23% awareness. That's respectable for any medium.

  • Widgets are a tiny fraction of marketing communications spending, but Adweek reports that they grew 166.7% last year. At that rate they won't stay tiny for too long.

Most marketers are having a horrendous year. The middle market has been ravaged and up-market brands have taken some hits. Folks are scared, cash is tight, jobs are shaky, credit has dried up, the stock market cratered and house values plummeted. It's not surprising that sales are way down across a broad spectrum of industries with consumer confidence approaching negative numbers.