General Motors Cuts Its Ad Budget

One of the common bright spots in the world of online advertising has been General Motors' pledge that it would move its half of its $3 billion in advertising over to online. So news that it would cut its advertising budget by an undisclosed amount will no doubt send tremors through an industry already worried about the effects of recession. This is all part of news, as my colleague Jim Henry noted, of GM cutting back to the tune of $15 billion in every part of its business. However, the news should be scarier for those still hoping for ad spend dollars in traditional media.

Michael Estrin of iMedia reports further on the development:

GM Chairman and CEO Rick Wagoner declined to give specifics on the cuts, but GM, which spent $3 billion last year on advertising, has been trimming its messaging operations each year since 2005. However, the cost-cutting probably means more to fret about for those on the other side of advertising's digital divide, according to John Grudnowski, VP of modern media at the space150 advertising agency.

"GM still needs to sell cars, and they will measure growth associated with this shift," Grudnowski says. "This learning will be the silver lining in a bad economic situation for marketers at GM. They'll come out the other side more effective."

That's a sentiment shared by Ken Graffeo, COO of PointRoll, who says that automotive marketers in particular are likely to avail themselves of digital because they are under enormous pressure to run highly accountable campaigns.

What about Web publishers? Online ad optimists have argued that in a recession, the Web should be ok, because ad buyers will shift their spends from expensive, hard-to-measure old media to cost-effective and precise online buys. We hope they're right, but we think they're wrong -- big ad pullbacks will be felt by everyone with ad inventory to sell.

GM's ad spending on newspapers was down 32% in 2007 from 2006, while spending on TV ads dropped 11% that year, according to TNS.