In Depth

Analyst: Hurricane Sandy to Cost Ad Industry $500 Million -- New Report Lowered U.S. Ad Forecast

By Rupal Parekh
Advertising Age

The climate for growth among U.S. ad companies had already been looking stormy for the second half of 2012, and now, Hurricane Sandy is leading to a worsened outlook.

As Ad Age reported last week, major holding companies such as WPP and Publicis Groupe cut their growth forecasts. Martin Sorrell, the CEO of the biggest ad holding firm in the world by revenue, last week slashed its full-year sales-growth target for the second time in two months as clients in North America and Europe cut spending. That announcement led to stock dropping as much as 5.2%.

The storm that hit the Northeast this week -- and with it many companies in the media and ad space -- has prompted the yanking of ads and a slowdown for many U.S. marketers in a key area of the country.

In a new report that cites the impact of the hurricane and other economic variables, media-research firm Pivotal Research Group lowered its U.S. ad forecast to a 0.5% decline in the third quarter, a 1.4% decline in the fourth quarter and zero growth for the full year.

The projections have been revised down from an earlier forecast of 1.2% growth for the third quarter, 0.9% growth for the fourth quarter and 1.4% growth for the full year. Wrote Brian Wieser, a senior research analyst at Pivotal: "The first signs of a stormy second half of the year for advertising had become clear once the agency holding companies reported, and then Superstorm Sandy arrived, making us certain that 2012 will prove to be a year without growth for the U.S. advertising economy."

Mr. Wieser estimated Sandy will cost the advertising industry about $500 million in lost revenue, due to interruptions in local TV and radio programming and also factoring in decision-making by media buyers in the wake of the storm.

-- With reporting from Ad Age sibling BtoB