Too Late to Play the Advertising Recovery?

The global economic downturn has affected nearly every industry, including advertising. While we think ad spending will remain weak in 2009, we anticipate a rebound in 2010. However, it may be too late for investors to play this rebound, as the stocks of most advertising-related companies have appreciated considerably since the market lows of the past year.

According to TNS Media Intelligence, after falling 4.1% in 2008, U.S. advertising fell another 14.3% in the first half of 2009. With the exception of online advertising, every major category (television, newspapers, radio, magazines, outdoor) posted double-digit declines during this period. While media companies that depend on advertising revenue have taken a big hit during this recession, marketing services conglomerates  Omnicom OMC,  Interpublic Group IPG, and  WPP Group WPPGY have been affected as well. During the first half of 2009, U.S. internal revenue at Omnicom, Interpublic, and WPP declined between 10.1% and 12.3% compared with the overall decline of 14.3% reported by TNS.

While their short-term results are discouraging, we like the marketing conglomerates' competitive positioning. Although most large corporations have internal marketing departments, they still outsource the majority of their marketing needs (ad creation, brand strategy, media buying, public relations, and so on) to specialized agencies because of the complexity and scale of their campaigns. As a result, the large global footprint and broad portfolio of services these firms can offer make it very difficult for smaller rivals to compete for large, integrated marketing campaigns. Additionally, the nature and variety of services performed leads to customer "stickiness," as building relationships with new service providers can be cumbersome. Combined with incremental acquisitions and international exposure, we think marketing services firms will enjoy steady revenue growth over the long run.

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conglomerate [kɔn'glɔmәrit] : v. 聚結

  noun

  1  [C] (business) a large company formed by joining together different firms:

      a media conglomerate

  2  [sing.] (written) a number of things or parts that are put together to form a whole

  3  [U] (geology) a type of rock made of small stones held together by dried clay

majority [mә'dʒɔriti] : n. 多數, 大半

    The majority of people interviewed prefer TV to radio. * The majority was / were in favour of banning smoking.

    OPP MINORITY

the silent majority : (美國人口中政治上不公開表態的)沉默的多數, 普通的美國公眾

    [usually sing.] the large number of people in a country who think the same as each other, but do not express their views publicly:

    It is time the silent majority made their opposition known.

portfolio [pɒ:t'fәuliәu] : n. 皮包, 公文包, 部長職務, 有價證券財產目錄, 藝術代表作選輯

campaign [kæm'pein] : n. [軍]戰役, (政治或商業性)活動, 競選運動 vi. 參加活動, 從事活動, 作戰

      1  ~ (against / for sth) a series of planned activities that are intended to achieve a particular social, commercial or political aim:

cumbersome ['kʌmbәsәm] : adj. 討厭的, 麻煩的, 笨重的

incremental [inkri'mentәl] : adj. 增加的

acquisition [ˏækwi'ziʃәn] : n. 獲得, 獲得物