On Friday the latest doomsday threat out of Washington became a reality as automatic federal budget cuts, known as sequestration, went into effect. What effect that will have, we can’t be sure. The latest round of debates between Congress and the White House was full of rhetoric and classic “we said, they said” as politicians “discussed” what across-the-board cuts to government agencies and defense spending would mean for the average American. But for most of us – including those of us in the advertising industry – it is a “wait and see” situation, since we likely will not know the true impact of the cuts for a while.
For the advertising industry specifically, sequestration brings with it many unknowns: whether or how the cuts will impact the industry, if the cuts will be reflected in the greater economy and negatively impact the recovery, or if regulation and innovation will stall. We will all be anticipating what the real impacts of sequestration may be on advertisers and marketers – and how cuts will shape critical public issues across the board.
The Way I See It
• I see the advertising industry only continuing to evolve with digital and mobile, interactions with consumers, and data, not to mention new technology being developed nearly every day. While industry self-regulation on major issues like advertising to children, online privacy, and data collection by apps is strong, government agencies including the FTC have only begun ramping up crucial regulatory and enforcement efforts of the advertising industry. It will be interesting to see whether this is impacted by sequestration – will other critical issues take precedence over issues impacting the advertising industry?
• We can safely predict government agencies will cut ad spending, but it is unclear whether large brands or advertisers will feel a pinch across the board. Advertising Age reported earlier this week that ad agencies that count government agencies – such as the U.S. Postal Service and the Army, the government’s top-two largest ad spenders – as clients will feel the pinch. And the agencies will see an impact in ROI from decreasing marketing. Take these budget cuts as opposed to the investment announced by NYC Mayor Bloomberg in a new initiative and marketing campaign dubbed “Made in NY” to support the booming startup scene. I see Silicon Alley and NYC on the whole seeing a great ROI from this initiative, with startups seeing more value in coming to NY thus supporting the local economy, growing tourism, and adding jobs.