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US advertising hits all-time high

September 21, 2018

MAGNA advertising has published its latest ad forecasts, declaring that US advertising has hit an all-time high.

Key highlights from its report include:

– Media owners net advertising sales (NAR) will grow by +6.9 per cent in 2018 to reach $207 billion, a new all-time high. Neutralising the advertising sales generated by cyclical even-year events (Winter Olympics, FIFA World Cup, Mid-Term Elections), 2018’s underlying growth will be +5.2 per cent compared to +4.9 per cent in 2017. MAGNA expects advertising growth to continue in 2019: +4.0 per cent (excl. cyclical events).

– MAGNA increased its 2018 growth forecast by half a point since the last update, from +4.7 per cent (June Forecast, excluding Cyclical Events) to +5.2 per cent (September Forecast). The upward revision was triggered by a stronger-than-expected market in the first half (+6.1 per cent) and robust macro-economic forecasts. The 2019 forecast was also raised due to continued expectations for economic strength, from +3.6 per cent to +4.0 per cent (excl. cyclical events).

– Digital advertising will reach several important milestones this year: revenues will pass the $100 billion mark ($106 billion), and account for half of total US advertising sales for the first time (51.5 per cent exactly). Mobile digital advertising (ad sales generated through smartphone impressions and clicks) will grow by +30 per centthis year to approx. $70 billion, which is now more than television and twice as much as desktop-based revenues, reflecting the ever-growing role smartphones have taken in our lives. Meanwhile, desktop-based ad sales will decline by -3.9 per cent hit by lower consumption and by ad blocking.

– Cyclical events will drive $4.3 billion of incremental advertising dollars this year. Political advertising is expected to bring $2.9 billion into television, an increase of +19 per cent vs 2014, as well as $400 into direct mail, as more House races are expected to be competitive than initially thought (105 races this year compared to 70 in 2014). This will come on top of the Winter Olympics and the FIFA World Cup, which have already generated $630 million and $200 million of incremental national TV revenues respectively.

– Advertising revenues grew by an impressive +6 per cent in the first half of 2018 (excluding cyclical events). 1Q18 was the strongest quarter in two years (+6.5 per cent) and 2Q18 was almost as strong (+5.8 per cent). A robust economy and the developing digital economy have been fuelling advertising spend from most industries. Finance, Pharma and Technology were the main drivers of growth in the first half of the year, increasing ad budgets by +15 to +20 per cent. As comparables become harder in the second half, MAGNA is expecting growth rates to slow down slightly, yet the second half is still forecast to grow by +4.2 per cent.

Digital media continued to show impressive revenue growth in the first half: search revenues grew by +18 per cent, social media ad sales by +38 per cent, and online video ad sales by +27 per cent. Meanwhile television ad sales were flat when neutralising cyclical effects (+3 per cent overall). Local TV ad sales were flat (-5 per cent stripping out incremental political spend). Print ad sales were down -16 per cent and linear radio ad sales were down more than -5 per cent, as local radio pricing continues to decline. Out-Of-Home had a strong half, with cinema advertising up +12 per cent and the rest of OOH (billboards, transports, malls, and street furniture) up +3 per cent year-over-year.

Advertising revenue will grow by +6.9 per cent on a full-year basis in 2018, but digital media formats will capture most of the growth once again. Digital ad sales will grow by +16 per cent. Social media will be the fastest-growing segment again, with advertising revenues growing by +38 per cent, but Search and Digital Video are also showing robust growth with expected increases of +16 per cent and +25 per cent, respectively.

Meanwhile, non-digital advertising sales will decrease by -4.6 per cent this year. National TV NAR will grow by +1 per cent (excl. cyclical -1 per cent) and Local TV ad sales will increase by +9 per cent (excl. political: -4.5 per cent). Out-of-Home ad sales will grow by +3 per cent while Print and Radio ad revenues will decline by -17 per cent and -5 per cent respectively. Direct Mail sales will be stable thanks to political revenues (-0.3 per cent overall, -2.1 per cent excl. political).

Advanced TV advertising keeps growing, as it brings the power of a traditional big screen linear experience augmented by superior targeting abilities. Household Addressable campaigns represent approx. $800 million while Over-the-Top, IP-delivered campaigns are growing by +40 per cent per year to reach $2 billion this year.

As the economic outlook remains strong for 2019 (GDP +2.8 per cent according to the Philadelphia Fed’s SPF survey), MAGNA anticipates a tenth consecutive year of growth for the US advertising market. Growth rates will slow to +2.3 per cent, due to the lack of cyclical events or +4 per cent on a normalised basis (a mild slowdown vs 2018’s +5.2 per cent growth).

According to Vincent Létang, EVP, Global Market Intelligence at MAGNA and author of the report:“The advertising economy showed robust growth in the first half, as the strong economic environment benefits key sectors like Finance, Technology and Travel. Digital media was the big winner again, but national TV revenues were also stronger, stabilising after six quarters of erosion, helped by strong spending from Pharma and Food/Drinks, and strong pricing. Meanwhile local TV, radio and print continue to struggle with weak local media spend (e.g. auto) and poor pricing.”

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