Businesses may be temporarily turning away from services such as advertising, web-design, legal services, and landscaping to rely more on in-house resources for their needs as part of their overall cost cutting strategy. Employees with these skills may have been able to hang on to their jobs over the downturn if they can add additional value to be tapped by their employers …at relatively lower costs.

Advertising and marketing services are especially at a low point in sales growth, dropping down into negative figures after posting a healthy sales growth rate of 8.90% at the onset of recession in late 2007.

The table below lists the average sales growth for 10 service-oriented industries. The data is for year end 2008 through October 2009.  

Companies such as newspapers, news websites and social networking sites dependent on advertising dollars to make money may see a particular slow down as businesses cut unnecessary expenditures for fear of continued economic woes.  Sageworks Database of private company activity shows a downward trend in advertising dollars spent as a percent of sales from 2007 to 2008 for automobile dealers, restaurants and retail clothing stores.

In light of this trend Brian Hamilton, CEO of Sageworks, remarked, “when companies feel threatened in an uncertain economic environment, they tend to cut discretionary expenses, one of which is advertising.  Unfortunately, this tends to further depress sales and profits, since good advertising efforts drive profits and sales.”

The downward trend in advertising which is presumably due to tightened spending by businesses is similar to the downward trend being felt by retail stores due to tightened discretionary spending by consumers (see “Small and Large Retail Businesses Feel the Downturn“).

See also: http://www.adotas.com/2008/09/report-display-down-6-year-over-year/ - On online advertising trends in 2008.