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Ad spending in steepest drop since 2001

NEW YORK (Reuters) - Advertising spending in the second quarter suffered its biggest drop since the last U.S. recession, declining 3.7 percent as corporations responded to economic worries by curtailing their marketing budgets, a new report shows.

The TNS Media Intelligence report, released on Wednesday, suggests that steep drops in expenditures from the automotive, telecommunications and retail categories were to blame for the largest U.S. spending decline in any quarter since 2001.

U.S. advertising spending fell 1.6 percent for the first half of the year, according to TNS, which tracks ad expenditures.

Figures for the second half of the year should be helped by spending on the Olympics and the political ads, though observers are increasingly worried about the effect that the financial crisis will have on spending.

“Advertising expenditures started to contract in March, well before the September turbulence on Wall Street renewed concerns about the health of the economy and possible collateral damage to the ad market,” said Jon Swallen, the senior vice president of research at TNS Media.

In a statement, he added that “sustained improvement will most likely depend on a turnaround in consumer spending that rejuvenates corporate profits and encourages marketers to expand their advertising efforts.”

The TNS report showed advertising growth slowed in every type of media -- including television and Internet -- from the first quarter to the second.

For the first half of the year, newspapers and radio showed the sharpest year-on-year declines in spending, at 7.4 percent and 6.5 percent respectively, extending trends that have undercut both those industries in recent years. Internet advertising was the biggest gainer over the first six months, rising 8 percent.

Among top advertisers, the biggest drops in spending for the first half came from AT&T Inc, down 15.6 percent, and Johnson & Johnson, down 11.8 percent from a year earlier.

Even the biggest advertiser for the period, Procter & Gamble Co cut its spending by 7.6 percent to $1.49 billion, according to the report.

Concerns about cuts in spending by big marketers have plagued stocks of media companies that depend -- at least in part -- on advertising revenue. So far this year, shares of CBS Corp are down more than 40 percent, Viacom Inc shares are down about 35 percent and McClatchy Co shares are down more than 60 percent.

Still, upheaval in the financial markets hasn’t been all bad for media, according to another report. Horizon Media, a media agency, points out that some cable news channels and online news outlets drew record audiences as the financial crisis spread last week.

The report says SmartMoney.com saw a 30 percent jump in traffic; New York Times Co’s NYTimes.com had its highest ever daily total page views on September 15; Yahoo Inc’s Yahoo Finance posted a 32 percent increase in traffic on September 15 from the prior week; and the “Closing Bell” program on NBC Universal’s CNBC cable network saw a 70 percent jump in viewers.

SmartMoney.com is a joint venture of News Corp’s Dow Jones & Co and Hearst Corp’s Hearst SM Partnership affiliate. NBC Universal is 80 percent owned by General Electric Co and 20 percent by France’s Vivendi.

“Advertisers should be poised to take advantage of this,” said Horizon Media chief executive Bill Koenigsberg.

Reporting by Paul Thomasch, editing by Gerald E. McCormick

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