The reverberations of Donald Trump’s history-making victory were felt around the globe on Wednesday, as supporters and detractors alike grappled with the surprise ending to an election season like no other.
Advertising’s leaders struggled to predict what life might be like under a Trump administration, especially given his often-fluctuating policy positions during the campaign.
The election is "effectively a second Brexit that leaves many very surprised, including the markets and me," said Martin Sorrell, chief executive of WPP. "It’s going to take a significant amount of time to assess the implications beyond the short-term."
John Wren, chief executive of Omnicom Group, was also hesitant to forecast the effect of Trump’s leadership, but struck an optimistic tone. "While it is too early to tell what this change will mean for our industry and advertising and media spending, the American people, corporations and its institutions are resilient," Wren said in a statement. "We expect they will adapt to the new political landscape."
To help agencies and their clients through the transition, both the 4A’s and the ANA attempted to provide some early understanding of the business implications of a Trump led, all-Republican government. "Right now there are more questions than answers as to how the new administration will oversee the advertising world," said an ANA blog post. But Trump’s campaign promises and the Republican party’s past decisions provide some clues.
"Donald Trump being elected president is one of the most dramatic political upsets in the history of America," said Dick O’Brien, EVP of government relations at the 4A’s, in an interview. The message from voters was "loud and clear, a dissatisfaction of political gridlock and that action needs be taken to improve their lives."
Given Trump’s promise to "drain the swamp" and bring sweeping change to Washington, his administration will start with "the top of the mountain" big issues like national security, healthcare, trade and immigration, said O’Brien. But Americans can also expect Trump to tackle other issues that he "can make quick progress on" that will heave a direct impact on the advertising business.
Chief among those will be tax reform. At the moment, US corporations can write-off 100% of their advertising costs as a business expense—a major boon to the industry. Trump has said he wants to lower the corporate tax rate from the current 35% to 15% and has a working draft for a plan in the House Republicans’ tax reform blueprint, which suggests dropping the deduction to 50% in first year and amortizing the rest over 10 years. Savings from the corporate tax reduction could be offset by that costly change.
"We are all assuming that tax reform is the first big debate we face with the government once the Trump administration is formed in January," said O’Brien. "There are fairly serious consequences if it goes the wrong way."
The price tag for that change has been estimated at $169 billion over 10 years. "If you change just one little flick in the tax code toward advertising, you can return $169 billion to the government over 10 years," he said. "Another way of saying that, is that it would be a $169 billion price increase in the cost of advertising to advertisers. So it’s not a small issue." Savings from the corporate tax reduction could offset that costly change, but no one can say for sure.
The ANA also identified tax reform as an early goal for the Trump administration that would affect the ad business. "Proposals have been floated in the recent past in both the House and the Senate to change the tax code to end the immediate write-off of all advertising expenses," said the ANA. "This proposal would impose a $169 billion to $200 billion increased burden on the ad community."
Stocks rose on Wednesday partly on speculation that Trump would carry through on promises to reduce government regulation of private business, which will naturally benefit the advertising business, as well. In particular, two recent Obama administration regulations affecting the advertising industry could be on the chopping block: A new labor law that mandates overtime pay for all employee making under $46,000, and the FCC’s new privacy rules, which redefined the standard of how internet service providers can collect data for advertising.
"This is the kind of regulatory zeal that are typical of Democratic administrations that is not typical of a Republican one, and probably won’t be typical with Trump, who campaigned almost single-mindedly on getting rid of government regulation," said O’Brien.
Trump will also have to make at least one appointment to the US Supreme Court to fill the vacancy created by the death of Justice Antonin Scalia. And a Republican choice will likely strengthen First Amendment protections for advertising. Conservative judges have a history of protecting commercial speech, noted O’Brien. And Trump may have the opportunity to appoint several his first term. "What that will do is it will secure the foundation of commercial speech for decades to come," he said.
There are many unknowns, but there is some confidence about the future. "I don't think it will create any significant economical impact in our business," said Yannick Bolore, chief executive of Havas. But Trump’s victory may have changed the way political campaigns are run. "Political communication has been completely disrupted," he added. "As we know from brands, social media creates new opportunities to connect more personally with people. And with less need for huge paid media campaign. It is another proof of the impact of modern marketing that is changing all aspects of modern society."