Ms. Quadrani: I wouldn't characterize this necessarily as a downturn in spending. I would call it a deceleration in the growth. What we saw last year was a really exuberant year in the sense that advertising expenditures in the US grew by roughly 10%, which was really incredible. The Summer Olympics, the presidential elections, and a very hot economy enhanced overall growth in the industry. This year we're seeing not only difficult comparisons but also a much softer economic environment, which has dramatically curtailed growth in advertising expenditures. It is too early to tell if we will have a down year in terms of advertising spending or just dramatic deceleration from last year's expansion. Our estimates at this point assume modest growth in the US of 1%-2% with stronger growth internationally, probably closer to 3% or 4%. The surprise, if I had to say that there was a surprise, was how quickly the growth slowed. The economy went from being red hot to practically stopping cold. I think the fact that it happened so quickly was a bit of a surprise.
TWST: Has the impact of the demise of the dot-coms on the advertising
and marketing services companies been overdone?
Ms. Quadrani: With regard to the advertising and marketing services
companies, the impact has been overstated. But in terms of the overall
industry, I think the impact was very powerful. We saw this emerging
category come out of nowhere last year, or late the year before,
creating enormous demand. They were able to pay anything they wanted for
advertising space in a very hot economy, which then created a lot of
demand in an already very tight market. To have that category completely
disappear almost overnight is a big shock in an already lackluster
environment. I think from a pricing standpoint it had a very strong
effect on the price of media. But it is unclear how it actually impacted
the advertising and marketing services companies; the top ones, the
public ones, never really took on too many clients from the dot-com
area. At that time they could afford to pick and choose. And therefore
their exposure in terms of revenue concentration never was really much
more than 2%-3%. So the disappearance hasn't had that much of an impact
on their revenues.
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