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Is Terrorism Reducing Advertising Demand?

**originally posted in our now closed forums in 2007 by user MarkTwain***

so……i tried to answer someones question on a media/politics message board on this issue…

the guy was asking why are mainstream or corporate media companies are so keen to follow the government line on terrorism (sometimes abbreviated to MSM, mainstream media, in contrast with the growing alternative media market, i use the term traditional media too)

he thought that it would reduce “consumption” (his term) by scaring consumers into not spending money and therefore advertisers would`nt like it and should put pressure on media corps to change their coverage. (to become more reasonable and less alarmist about the issue)

he proposed…”how does this (alarmist terror coverage) increase consumption which is the aim of advertising in the media?”

I thought his confusion was due to the terms of his question (like wittgenstein said, if you cant answer a question there is something wrong with the question……i dont take this as an absolute rule but it holds true in many circumstances)

here is my post in reply to him…..(i would appreciate a brief comment about whether i am on the right track, be honest please!!, if its bad its bad etc and i dont want to put about false arguments so i should adjust it if its wrong etc but everyone else had crashed on the rocks trying to answer his question so i took a deep breath and had a go)


right, im not an economist but i’ll have a go at discussing the subject (im teaching myself at the moment, if there are any more knowledgable on the subject reading this then please post if my analysis is flawed or whatever)

firstly advertising is not solely about selling products and services, think about political ads (a big industry in the u.s., not so much in the uk but still a factor) and charities advertise too, i cant produce a comprehensive list of ads which are not product or service based but there are enough different types to challenge this premise in your question daniel (in my opinion)

so media products which survive on ad revenue are not soley reliant upon product/service based sources. (although i would think its the major share)

secondly, you say that advertisers wish to increase the level of consumption.

yes and no, those who sell products or services wish to increase their market share and increase demand for their products/services, not overall consumption as such. (managing levels of consumption is the job of government fiscal policy, and in global terms its the job of macro economic institutions like the IMF amongst others to research the issues and advise governments etc, they were set up after the war to avoid great depressions etc, at least thats part of what they claim to do, we all know there is alot more to the bretton woods gang than that but thats another story)

according to the IMF and other macro economists the u.s. and the u.k. populations are consuming too much and not saving or investing enough, while the converse is true of china. (their risk averse tendancies are helping to fuel the spending binges of the anglo-americans, this is a source of global economic instability)

so consumption as an economic factor or indicator must respond to domestic and global need/situations and grow in proportion with other factors. (overall GDP growth is definately wanted by governments, industry and advertisers etc)

so its not the case that industry or government or advertisers wish to see an increase in consumption per se, they do but only if this increase is part of a balanced growth overall. (although some short term-ist flyby nights might not be bothered about overheating the economy till it collapses, i dont think this is the majority view however)

if we contrast consumption with investment or savings we see that both industries are advertisers, banks for instance advertise savings and investments and pension plans etc etc while car companies and retail chains for example advertise products for sale etc etc, so advertisers are both champions of consumption and saving/investment, some like banks offer both, selling credit products on the one hand and investment or savings products on the other, people have to do something with their money remember, they cant keep it under the bed or it will lose value due to inflation, they have to spend it or save/invest it, this happens regardless of terrorism)

thirdly your question seems to imply that levels of consumer demand should be dropping because of this terror situation, have you checked the figures? (retail would be a good one to look at), however if there is slight downward trend you would find it difficult to analyse why that is happening, and would probably conclude rising energy costs and local taxes and possible inflation fears and interest rate rises would be the cause. (and in terms of advertising it makes little difference, energy companies advertise too remember)

so to conclude, i dont see how this terror situation is going to reduce the overall ad spend significantly enough for the media to reduce its support for the political establishment.

The thing that is hurting the traditional media at the moment is the internet primarily, there has been a fragmentation in audiences and readerships etc, and the advertising industry is trying to adjust to the new situation and to find spaces to put its ads online. The newspapers are considering raising their cover prices to make up the drop in ad revenue while trying to increase their online presence to catch that market, Tv companies are also trying to get their share of the online market, and look at murdoch buying Myspace, this isnt even news or entertainment, its networking communications(although his empire is not sure how it will make real money out of it yet), the tradional media are worried that they wont be able to keep up their high budgets and profits unless they can find ways to preserve their ad revenues or find other methods for making money, i think this is due to technology not terrorism, check out the interview with alan rusbridger from the guardian which is posted in the video thread, he discusses how they are trying to make up for lost revenue and how much money newspapers are losing at the moment)

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