It can be easy to forget that at this time four years ago, the future of the global economy was in limbo. Financial markets around the world were in chaos and the specter of a global depression was being taken seriously.
Today, the internet economy is booming and retailers are expressing optimism for the holiday shopping season.
But under the surface, there is growing concern. As AdAge points out, if you take away all of the advertising activity around the Olympics and the United States election cycle, ad sales have been softer this year. And now advertisers have a new worry: the Fiscal Cliff.
The Fiscal Cliff refers to hefty new taxes and big spending cuts that will go into effect in the world’s largest economy, the United States, if politicians in Washington can’t agree on how to get the U.S. fiscal house in order before the end of the year. For obvious reasons, those taxes and spending cuts, which could send the country into another recession, have advertisers on edge.
As one cable television executive told AdAge, if the U.S. goes over the Fiscal Cliff, “we will see a conservative consumer base not spending the money they are spending now.” And that doesn’t bode well for the brand advertisers that keep Madison Avenue’s engine running.
It was the best of times, it was the worst of times
While there’s no doubt that the global economy isn’t in the type of shape it was in late 2008 when financial markets were on the brink of collapse, the reality is that the situation has been far from rosy since then.
In an effort to stop banking Armageddon, governments and central banks around the world took extraordinary, unprecedented steps to stop the bleeding. Their actions, however, were not solutions to the fundamental problems, and according to some, traded a collapse of the banking system for an eventual collapse of entire nations.
Time will tell if the gloom and doom crowd is correct, but at a minimum, the fiscal problems on both sides of the pond, highlight the fact that although many major companies have managed to earn record profits and build strong balance sheets over the past four years, they have been operating in an uncertain landscape for years.
But should a reminder that the global economy is still not in tip-top shape, courtesy of the Fiscal Cliff, keep brands and publishers from making the kind of investments they otherwise wouldn’t hesitate to make? The answer: no.
While it’s not prudent to throw caution to the wind — thinking through what-ifs is an important part of a sensible risk mitigation strategy — advertisers shouldn’t let fear prevent the kind of strategic investments that are necessary in any economic climate.
Business as usual
As Sarah Hofstetter, president of digital agency 360i, told AdAge, “The current gridlock in [Washington] D.C. is just a continuation of the uncertain economic outlook that’s been in place since 2008.” That uncertainty, however uncomfortable, hasn’t completely sidelined companies. They’re still spending and investing, even if on tighter budgeting cycles.
Obviously, executives at some companies, like Proctor & Gamble, can sleep easier at night knowing that many of their products are staples consumers will need to buy even in the worst of times. But for most companies, going into complete hibernation because of renewed concerns about the prospects for near-term economic malaise is rarely a productive strategy.
With this in mind, brands should think less about the answer to the question, ‘What happens if we go over the Fiscal Cliff?’ and ask themselves an even more important question, ‘If we do go over, how do we want to land when we reach the bottom?’