A Boom in Political Ads

Politicians are expected to spend $3 billion on TV advertising in 2008, driving up ad prices for everyone. Businesses are scrambling to work around the problem

With TV ads from Senator Barack Obama (D-Ill.) airing during the Super Bowl in some markets and Senator Hillary Clinton (D-N.Y.) buying an entire hour on the Hallmark Channel on Feb. 4, the airwaves were jam-packed with politicians in the days leading up to Super Tuesday. But marketing experts say that was just a small preview of the deluge to come this fall, as candidates for offices ranging from dogcatcher to President of the U.S. begin to buy television time in unprecedented amounts. The surge in political ads threatens to crowd out the messages of business marketers.

In 2004, politicians at all levels spent roughly $1.7 billion on TV advertising. That number is expected to nearly double, to $3 billion this year, according to an analysis by TNS Media Intelligence/Campaign Media Analysis Group. The massive influx of spending into the roughly $26 billion TV spot-advertising market will drive up ad prices for everyone, especially in the most hotly contested states like Ohio and Florida.

In general, politicians—even Presidential candidates—avoid national network TV advertising, preferring instead to buy advertising from local affiliates in key battleground markets. So rather than buying American Idol across the country, which would be a relative waste of money for a Presidential campaign that's not competing over every state in the union, candidates buy ads on local affiliates during American Idol.

Some Companies Avoid the Fray

By some estimates, the law of supply and demand will cause prices of local television advertising in the contested areas to double during October. Ad inventory could become scarce or nonexistent. "There's only 24 hours in a day. You can't add more spots," says John Hendricks, vice-president in charge of sales at Tribune Broadcasting. "As inventory goes away, price goes up." Businesses "are going to have to plan accordingly, or look into hiring a skywriter," says Evan Tracey, chief operating officer of the Campaign Media Analysis Group.

That's leading to some creative workarounds. Tony Pace, chief marketing officer for the Subway sandwich chain's franchisee marketing arm, is advising franchise owners not to even try to compete with politicians in the local TV ad market. "You could be dealing with 70% premiums, for crying out loud," Pace says. Also, Subway doesn't want to be anywhere near the politicians when their ads start turning negative. One solution: The chain will consider moving toward movie theater advertising during election time, to catch viewers in a more escapist frame of mind.

Scott Berg, director of worldwide marketing at Hewlett-Packard (HPQ), says he's evaluating significant changes to the company's advertising budget, which has been estimated at more than $800 million annually. The height of the political advertising season "hits the sweet spot for everybody in retail," Berg says. "It comes right between back-to-school and the holidays, and typically we buy a much heavier rotation for our ads at the end of October."

Internet and Radio May Be Beneficiaries

This year, Hewlett-Packard will do several things to steer clear of the politicians, including shifting more money to Internet ads both on the big Web portals and on niche sites for photography and printing, where users will already have a point of reference for HP's computer-oriented products. The company is also likely to ramp up spending on radio, which is not as highly prized by politicians, and particularly on satellite radio, which Berg values for its ability to target narrow groups of listeners. And finally, he says, HP will keep an eye on local television markets in which statewide candidates drop out of races, giving business advertisers the chance to pick up their ad space on the cheap at the last minute. "You're going to have to be very flexible," he says.

T-Mobile USA is in a similar position. Brett Dennis, T-Mobile's director of media marketing, says he's seen the political ads building for months. Sensing an intense year on the horizon, Dennis says T-Mobile bought local television advertising for 2008 months earlier than normal. Now, he says, T-Mobile is weighing other media options for the fall, including shifting money to radio and the Internet. "We're a 52-week advertiser," he says. "People buy cell phones, even in election week."

Like Hewlett-Packard and T-Mobile, the hardest-hit advertisers will be those who buy local spot advertising with TV stations across the country. Since the 1990s, the vast majority of political spending has gone into local TV ads, as candidates got ever more sophisticated in targeting their message city by city, eschewing expensive national network advertising. Many companies do the same thing. T-Mobile, for example, buys a blanket of national advertising from the networks and then adds to that with strategic local spending market by market.

Even the savviest marketers are expecting to have difficulties with preemption this fall, when political ads displace many of the spots they've purchased. By law, TV stations can't turn away ads from federal candidates and that puts the squeeze on business ads. To find out just which spots are airing and when, Mary Barnas and her team at the media agency Carat are using a new TV-monitoring software program called Keeping Trac. "If the stations know you're monitoring them, your spots tend to run." And if they don't, at least Carat's clients will know to ask for make-good ads—after Election Day.

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