Recession? What Recession?
There are winners and losers in recessions. The obvious losers are laid-off workers, businesses that can no longer turn profits, and nonprofit organizations that rely on charitable contributions. But among the winners are some surprises -- take advertising firms that target gay folks, for example.
"Every recession has been our biggest growth year," says Todd Evans, chief executive officer of Rivendell Media, whose clients include Travelocity, Absolut, Bristol-Myers Squibb, and Johnson & Johnson. "Recessions make every company focus on who their consumers are, and that's what niche marketing is all about. The gay market is easy to target; it's an easy group to focus on."
Advertisers have it in their minds that gay people are recession-resistant, meaning they are more likely to continue their spending even in rough economic times. Why? Three reasons, Evans says: Gay people are less likely to let changes in the economy affect their behaviors, they have fewer (or no) children, and they are less likely to be strapped for cash. As a result, companies struggling to make money during down times often hone in on gay individuals and couples. "Every company wants to reach DINKs," Evans says, using the marketing acronym for "double income, no kids."
According to a study released in November 2008 by the polling agency Harris Interactive and Witeck-Combs Communications, a gay-targeted advertising consultancy, 32% of gay men and lesbians are likely to vacation for longer than a week in the next six months, despite the economic downturn, compared to 28% of heterosexuals. The study also found that gay people are more likely to continue to dine out and that gay men, in particular, are the least likely to change their restaurant spending during a slowing economy.
Bob Witeck, chief executive officer of Witeck-Combs, says he and other marketers first became aware of these trends after 9/11, when travel and restaurant spending plummeted among straight consumers but remained static, or even rose, among gays.
Armed with such data, companies have opted to invest in long-term advertising in the gay and lesbian press. Advertising growth in that segment is outpacing growth in the mainstream press, according to Rivendell Media: Estimated ad revenues in gay media grew by 148% between 1996 and 2006, compared to 51% average ad revenue growth among general consumer publications during that same period. In 2007 more than 96% of ads placed in gay print media were in local publications, with newspapers taking the lion's share of ad dollars. Still, both The Advocate and Out managed to increase ad dollars and ad pages from fourth quarter 2007 to fourth quarter 2008, according to the Magazine Publishers of America.
"With disposable-income items, you see a sustained level of advertising to LGBT individuals," says Justin Nelson, president and cofounder of the National Gay and Lesbian Chamber of Commerce in Washington, D.C. "While things have tapered off a bit, we are still buying our iPhones." But Nelson, whose organization works with 1.4 million LGBT businesses and entrepreneurs, adds that while gay consumers are being targeted for their spending habits, that does not mean that gay businesses are escaping the wrath of the recession. "A lot of gay-owned firms are hurting just like their heterosexual counterparts."
To survive, some gay and lesbian entrepreneurs-like Janice Mahlmann, who owns August eTech, an IT consulting business in Hamilton Square, N.J.-are banding together. Mahlmann joined forces with a nearby gay-owned marketing firm that was looking to expand its Web presence. "When times are tough, you want to work with people you're comfortable with, have security with, and really look out for you," she says. "We have a common connection in our sexuality. That creates a strong bond."
Mahlmann says the informal partnership, which involves the two companies offering each other's services to clients, has brought in a new income stream that's helping her to weather the recession. She's looking to expand it to a regular fifty-fifty profit-sharing relationship. "It's almost like having sales people you're not paying for," she says.
But the fact that Mahlmann has money in her pocket doesn't mean she trusts the companies who want her to buy their products. She fears that companies looking to make a buck during a downturn may opportunistically focus on gay consumers-but that once the slump ends, so might the attention.
"You can't come to us when times are bad and then turn your back on us when times are good," she says, referring to the often-erratic nature of inclusive advertising. "Unfortunately, that's what corporate America does."
Mahlmann isn't the only one who's skeptical that gays benefit from this "recession-resistant" idea. Economist M.V. Lee Badgett, the research director at the Williams Institute at the University of California, Los Angeles, and the director of the Center for Public Policy and Administration at the University of Massachusetts at Amherst, says gay people are actually more vulnerable to bias in down times, which ultimately leads to fewer job opportunities.
"That myth of affluence has driven a lot of marketing to the LGBT community," Badgett says. "But more ad dollars don't help the gay community in any meaningful way. They don't offset our economic problems."
In a paper published in 2007, Badgett and other researchers analyzed the results of multiple studies and found that sexual-orientation discrimination actually lowers the wages of gay men; a range of studies cited in the research showed that gay and bisexual men earned 10% to 32% less than heterosexual men. Compounding that disparity for lesbians is the fact that women consistently earn less than men.
But there's plenty more market research out there about gay consumers than there is hard data, which only adds to the advertising drive. For example, according to a report put out by San Francisco-based Community Marketing Inc., 92% of gay men are more likely to buy a product if they see inclusive advertising used to market it; lesbians dedicate more than one third of their time online using e-mail; and both gay men and lesbians are now spending 60% more personal time on the Internet, for an increase of six to seven hours per week, compared to 2007. (Since ads are increasingly shifting online, company marketers pore over this kind of info.) And perhaps most important, LGBT people are widely seen as having strong brand loyalties.
Then again, the idea of gay resilience in the face of recession could be thrown into question with this particular downturn, which most economists say is the worst since the Great Depression. Only time will tell if the patterns hold. Says Witeck, "This downturn is historic, and we don't have a lot of things to compare it to."