Dear Mast Research Report Readers,

Below is one of the better articles I’ve seen regarding the shift in MARKETING strategies which is resulting in the shift in advertising strategy and revenue, accordingly. Sometimes we (as media people) tend to forget that our valuable ad dollars are only a portion of an advertiser's marketing budget. As economic pressures continue to dictate stronger ROI and less "waste" in marketing, greater emphasis is being placed on pricing, incentives, customer retention and loyalty programs as well as shifts in media and advertising strategies to digital and newer forms of communication. That, coupled with the fact that traditional ad agencies can make more money as marketing services partners versus traditional advertising consultants and providers, we can anticipate that this is a trend that will only get stronger…

Where's the Money Moving? Out of Media
Ad Dollars Drop, but That Doesn't Mean Marketers Have Stopped Spending
By Bradley Johnson Published: June 11, 2007

CHICAGO (AdAge.com) -- U.S. ad spending -- at least the measured kind -- fell 0.3% in the January-to-March period, the first down quarter since the ad recovery began in 2002. But a drop in reported ad spending does not mean a drop in marketing spending. That's because what marketers need isn't just measured media; it's measurable results.

Omnicom President-CEO John Wren said his firm's emphasis on marketing services has given it an edge over rivals recently.

Budgets are gravitating from old-line measured media to an array of marketing-services -- digital, direct, customer relationship management -- that offers better tools to quantify results. Marketing services includes some media offerings, such as online ads. But much of marketing services doesn't fit in the box of an ad to be sold. For companies in the business of selling media space and time, a shift to non-media forms of marketing poses a fundamental challenge.

Marketing services win outMarketing-services disciplines often fly under the radar, unmeasured by ad trackers such as TNS Media Intelligence, which put out the first-quarter data. But the shift is clear: In 2005, U.S. agencies generated more revenue from marketing services than from traditional advertising and media, according to Ad Age's DataCenter.

The trend has continued. In the first quarter, the top three agency holding companies -- Omnicom Group, WPP Group and Interpublic Group of Cos. -- collectively generated 53% of worldwide revenue from marketing services. Omnicom last quarter generated even more revenue -- 57% -- from marketing services, and President-CEO John Wren said those disciplines have helped the firm outperform its rivals. "We are much larger in the marketing-services area relative to any of our leading competitors," he told analysts in April. "You know, I definitely think that's been a significant advantage for Omnicom over probably forever, but definitely for the last five or six years, and maybe even accelerated over the past couple of years."

To be sure, the economy is soft -- first-quarter GDP rose at an annual clip of 0.6%, worst since 2002 -- and ex-Fed chief Alan Greenspan sees a one-in-three chance of recession this year. Advertising can be a leading indicator: Measured spending began to fall three months before the official start of the 2001 recession, and it didn't begin a sustained rebound until six months after the downturn ended. But the agency business, boosted by digital work, is growing: U.S. agency employment in April hit its highest point since the 2001 recession. In contrast, traditional media companies have slashed 40,500 jobs -- 4.6% of workers -- since the measured-ad-spending recovery took hold in 2002.

Good for the web As traditional media disciplines struggle to adapt, internet media are gaining share. The internet's share of measured spending rose to 8.1% in the first quarter from 5.4% five years ago, according to TNS data. Even when they lose share, disciplines still can grow revenue. Consider the advent of TV: Every other consumer medium lost share from 1950 to 1960, yet every medium still managed to gain revenue during that booming decade. Even radio, most threatened by TV, managed a small gain. And by one measure, first-quarter measured media spending actually rose a little: Jon Swallen, senior VP-director of research at TNS, said the 0.3% drop becomes a 2.2% gain if you factor out Olympics advertising that boosted year-ago figures.

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