By Suzanne Vranica
Many on Madison Avenue expressed shock at Donald Trump's triumph in the presidential election. Now, the uncertainty of what a Trump administration will do is leading some executives to predict a slowdown in ad spending growth next year.
"Uncertainty is bad for ad spending growth," said Jonathan Barnard, head of forecasting for Zenith, an ad buying and research arm of Publicis Groupe. Still, he said there will not be an "apocalyptic pullback" and just how much contraction occurs depends largely on how the economy performs and what specific moves the new administration makes.
If Mr. Trump follows through on some campaign promises such as his pledge to overhaul trade treaties and deport illegal immigrants then "we could see a slowdown in economic growth, which will hurt ad spending, Mr. Barnard added.
Any policy affecting the auto industry could have major ramifications since the sector is the largest driver of ad spending in the U.S. Mr. Trump has threatened to slap 35% tariffs on cars imported from Mexico.
"It's plausible that if tariffs are applied there will be a countrywide impact but there are also specific sectors that may be punished like autos," and that could hurt ad expenditures, said Brian Wieser, senior research analyst at Pivotal Research Group. "It depends on policy and that is a massive wild card right now."
Marketers faced with ambiguity tend to want to hold onto cash to pad their bottom lines, ad executives say. Companies in uncertain times also tend to pull backon new product introductions and that also hurts ad spending.
Publicis Groupe's chief executive officer, Maurice Levy, said, "I believe here will be a slowdown" in the first quarter as marketers take a "wait and see" approach to Mr. Trump's election.
"We do believe that investment decisions will be delayed," said Kelly Clark, global chief executive of WPP's GroupM, the largest ad buying firm in the world.
Mr. Kelly said he expects ad spending in the U.S. to decline a few percentage points over the next six months. Prior to the election, GroupM had been anticipating U.S. ad spending would grow 3% to $183.9 billion next year.
Interpublic Group Chief Executive Michael Roth said the uncertainty could have a "chilling effect" on ad spending in the short term but he does not anticipate a long lasting contraction.
Some ad companies said during the most recent quarter they were already seeing slower growth in the U.S. in part because of the uncertainty looming over the presidential election.
Ad giant Omnicom Group pointed to the impact of the election during its third quarter result last month. A "very unusual year with the presidential election" is adding to a "general conservatism," the company's chief executive, John Wren, said during a call with analysts. In a statement today, Mr. Wren said it's "too early to tell what this change will mean for" media spending.
In the U.K., the "Brexit" vote in June to leave the European Union came as a shock to many and sparked worries of a major ad downturn. But so far, advertisers have largely reacted calmly, and there were no widespread budget reductions immediately after the vote. However, ad giant WPP suffered a slowdown in growth in its U.K. revenue during the third quarter, which Chief Executive Martin Sorrell said was "perhaps the first signs of Brexit anxiety."
"There is a lot of uncertainty and inthese circumstances clients are unwilling to invest," Mr. Sorrell said in an interview with The Wall Street Journal last month.
Some are betting that many of Mr. Trump's most controversial campaign promises won't become reality.
"My view is what is said on the campaign trail isn't necessarily what is going to happen, Mr. Roth at Interpublic said. "There is always a reality check on various proposals."
Write to Suzanne Vranica at email@example.com
(END) Dow Jones Newswires
November 09, 2016 16:06 ET (21:06 GMT)
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