Is Advertising the New Indicator for Emerging Markets?
Talk to investment gurus and they bandy about a litany of techno-babble for helping you invest.
But according to emerging markets expert Irwin Greenstein, for investors pursuing emerging markets, it may all come down to an indicator that’s far easier to understand: advertising.
If you read the Wall Street Journal of August 11, three stories clearly show you where the big bucks in advertising is going, why it’s going there, and what it could all mean to you.
A peek at advertising trends in Dubai, China and the U.S. fashion industry foretell an economic shift toward emerging markets — while a leak springs in the U.S. fountain of trickle-down economics
The Mideast Boom Town
Starting with Dubai, this Mideast boomtown is negotiating with international and local companies over naming rights for two dozen stations being built as part of Dubai’s new mass-transit system, according to the Journal.
For those of you unfamiliar with Dubai, it’s the newest hot spot (no pun intended) in the Persian Gulf for business, tourism and clubbing.
It has one of the largest concentrations of building cranes in the world. It consumes cement like a kid sucking up a Slurpee. The architectural marvels challenge the industrialized world with record-breaking builds such as the tallest, the greenest and the newest — including man-made islands that form palm trees and the Mother Earth.
Ask Joel Bowman
In short, Dubai is happening. (Just ask Joel Bowman, managing editor of Agora Financial’s Rude Awakening http://www.agorafinancial.com/
Dubai’s quest to build the most beautiful and modern cities in the world includes a new whizz-bang rail system. To help offset the estimated $4 billion in construction costs, the government is opening 23 of the 47 stops to corporate branding rights. This is prime advertising real estate: The Journal reports that much of the 45-mile rail system will be above ground, running parallel to Dubai’s main 12-lane highway.
As the Journal plays out the scenario, a rider on the new Dubai system might get off at the Citibank stop on the Nike line. Taking it a step further, if Coca-Cola were to win a station’s name, for example, it could block Pepsi ads from appearing at that station.
$200 Million for Dubai
The program could generate $200 million or more for Dubai each year if it proves successful.
In another logistics-related ad campaign, United Parcel Service, Inc. said it’s advertising only in China, a market the company calls “our next great frontier,” the Journal reported today.
UPS is the official Olympic sponsor of express and logistics services. It wants so parlay that deal into a branding program that reaches a new generation of Chinese entrepreneurs.
The UPS slogan in China is “If UPS can fully assist the Beijing 2008 Olympics, they can fully assist you.”
Not quite sure that association would here in the U.S. given our economic malaise, but it certainly plays into the Chinese sense of civic pride.
Could Take Off in the Near Future
Joseph Guerrisi, the Asia-based vice president of marketing, told the Journal that UPS aims to reach, among others, small- and medium-size Chinese companies that could take off in the near future, including businesses in the electronics, garment and pharmaceutical industries.
A recent survey by UPS identified a trend among the country’s growing affluent for a U.S. products ranging from beauty products to DVDs.
As ad and marketing dollars flow into emerging markets, the top U.S. fashion publications are seeing a cut in their revenues.
A Leak in Trickle-Down Economics
This clearly signals a leak in the White House’s trickle-down theory of economics. By granting tax cuts to America’s wealthiest, the Bush administration had boasted that more money would be spent on luxury items, hence creating a cascade effect down the economic food chain.
That may have been true while the markets were good and money was cheap. But using fashion advertising as an economic indicator, the trickle is drying up.
The September issues of hefty, glossy fashion and beauty magazines may become as anemic as the models between their sexed-up covers.
Condé Nast’s Vogue, Hearst’s Marie Claire and two-thirds of the 16 top fashion and beauty magazines by number of ad pages are smaller than a year ago, said the Journal.
The magazines’ core markets of luxury goods, clothing, jewelry and beauty products. Condé Nast has 18% fewer advertising pages, Vogue is down 7% and Hearst’s Cosmopolitan is 3.2% lighter.
Now bear in mind, this is the beginning of the big ad push leading up the holiday season. If you’re in the U.S. retail segment now, you may to consider putting your money elsewhere — maybe Dubai or China.
So while you read the Wall Street Journal, the Daily Reckoning and other financial stalwarts, check out AdWeek for additional market intelligence.