Media people on debt deal: Phew!

A deal to end the federal government shutdown and raise the U.S. borrowing limit was reached yesterday and passed by the president and Congress, ending the 16-day ordeal.

There are many people relieved at this news, and one such group is media buyers and planners, who worried that if the U.S. defaulted on its debt, it would send the country into another recession.

That, in turn, would result in a plunge in ad dollars just as the media economy is finally starting to recover.

“If they don’t get it resolved today I’m very fearful, and everyone else is too,” says David L. Smith, chief executive officer and founder of Mediasmith, told Media Life Wednesday afternoon as Congress was negotiating.

“Obviously the financial and travel markets would get hit really hard, and also others like automotive. It remains to be seen, obviously a lot of us are upset about, but we’re kind of powerless.”

Buyers say they have not seen any notable impact on ad spending since the shutdown began two weeks ago.

“My view is that it won’t have any noticeable impact on advertising beyond any government accounts that pulled spending out during the period of the shutdown,” Brian Wieser, senior research analyst at Pivotal Research Group, tells Media Life.

However, they do say clients are concerned about the situation and were paying close attention to consumer confidence levels, which influence ad spending.

In October consumer confidence dropped to a nine-month low in the wake of the shutdown, according to Thomson Reuters and University of Michigan, to 72.5. That was a decline of 6 percent from September.

“There are certainly clients who are nervous. There are no pullbacks that we’ve seen, but there are major categories like travel getting hurt big time,” Smith says.

“The travel industry is losing money every day, and that affects every budget in that industry. Those budgets are funded by full hotels, full airplanes, etc.”

So far this year advertising has grown in fits and starts. Second-quarter ad dollars were up a healthy 3.5 percent, even compared to heavy political spending last year. But first quarter was down 0.1 percent.

That fits the pattern that’s been seen over recent years. Robust growth of 6.5 percent in 2010 was followed by an anemic 0.8 percent gain in 2011.

Even without the threat of another recession from the looming the debt crisis, media analysts don’t see that up-and-down pattern changing anytime soon.

“The media economy is middling, but that’s not bad given a still-weak economy. But I think that media will mostly be middling in years ahead, with some bright spots and many weak ones,” Wieser says.

Tags: ad spending, advertising, debt deal, media buyers, media economy, media planners