This week Viacom (VIA) CEO Philippe Dauman warned Wall Street that ad sales aren’t going well: The 7% growth the company had in the first quarter will be more like 3% to 4% in Q2. Philippe singled out weakness in automotive industry, in addition to the already decimated financial/mortgage business
But Martha Stewart Living Omnimedia president Wenda Harris Millard (SA 100 #38) says that’s just the tip of the iceberg. She says that in addition to a faltering economy, big media now faces a new problem: It can’t see the future any more.
Why? Because a staple of the ad industry — consumer packaged goods — has changed the way it buys advertising, and the results have thrown the media business into chaos.
Earlier this year, CPG companies like Procter & Gamble (PG), under pressure from their own rising food, commodities and fuel costs, shifted ad planning from an annual to a quarterly basis and making shorter-term ad commitments. That means media companies that could once make reasonable projections for FY revenues now have to update their assumptions every few months. “The planning cycle has changed,” Wenda tells us. “This is wreaking havoc on media company forecasting.”
Who does this hurt? Just about anyone dependent on national advertising (CBS (CBS), NBC U (GE), News Corp. (NWS), etc.): Millard thinks Viacom’s warning is the first of many to come.
This will affect the online business too (and may be one of the reasons we’re hearing that online “scatter” ads have dropped this quarter). The relative bright spot for Web publishers: They’re already used to selling most of their inventory on a quarterly basis, except for major portals like Yahoo (YHOO), which sells scarce homepage inventory well in advance. But for TV, print, and radio, this is another bummer in a lousy year.