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News > Companies
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Ad sales still slow
graphic November 28, 2001: 12:08 p.m. ET

Industry tries to shake off the effects of terror attacks and the economy.
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  • Knight Ridder warns on 4Q - Nov. 16, 2001
  • Media sector suffers with economy - Nov. 9, 2001
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    NEW YORK (CNN/Money) - The advertising industry may have struggled in October to shake off the effects of the Sept. 11 terrorist attacks, according to recent Wall Street research, and a recovery in the industry might be delayed until late in 2002 - or beyond.

    In a research note published Tuesday, Merrill Lynch analyst Lauren Rich Fine said the industry's October sales were surprisingly bad, apparently a "hangover" effect of the Sept. 11 attacks, which put a dent in ad revenue as many broadcasters operated for several days without advertising.

    "We sense that very little business was done [in] the first half of the month," Fine wrote. "While conditions improved towards the end of the month, a certain amount of paralysis still exists."

    A slow economy was already hurting ad revenues for media companies this year, and that situation was worsened by the Sept. 11 attacks.

    For the longer term, however, the current downturn appears to be a normal one, Fine said, a natural reaction to overspending by technology, telecommunications and dot.com companies between 1998 and 2001.

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      We're now in a situation where demand is slowing, while there's a huge increase in supply, which is still moving higher.  
         
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      Linda Bannister,
    Banc of America Capital Management
     
    "Now that those areas have been corrected for, there is no reason we will not have a traditional recovery," Fine said.

    Many analysts say the ad industry typically lags a recovery in the broad economy by some months. Most economists think the U.S. economy is in a recession, commonly defined as two straight quarters of shrinking gross domestic product (GDP), but they also expect the economy to recover in the first half of 2002, meaning the ad industry could recover in the second half of the year.

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    One problem for ad sales, however, could be increased competition - there are more media outlets than ever, but the number of advertisers is flat or falling.

    "We're now in a situation where demand is slowing, while there's a huge increase in supply, which is still moving higher," said Linda Bannister, media analyst at Banc of America Capital Management.

    "I'm of the opinion it will take a little more time to get to normal trend-line ad growth," she added. "It could be 2003 before that starts to happen." graphic

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    Knight Ridder warns on 4Q - Nov. 16, 2001

    Media sector suffers with economy - Nov. 9, 2001





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