Advertising Is Strong

Advertising Is Strong

November 26, 2018

That’s the word from Pivotal Research Group Senior Research Analyst Brian Wieser who’s revising his expectations for U.S. advertising in both 2018 and 2019. Wieser is now calling for 6.5% growth in 2018, up from his previous 4.8% forecast. And his new 2019 forecast is 4.0% growth, which is up from his previously predicted growth of 3.5%. Digital is strong of course, but what about radio?

Wieser says digital is driving all of the growth in advertising, but it’s not all about money shifting from traditional media. “We think this trend is aided to only a small degree by large, traditionally distributed brands shifting budget shares away from non-digital advertising. Instead, we think it is driven by ongoing shifts of spending into digital from small businesses, the growth of e-commerce, app developers, and direct-to-consumer brands (including those owned by manufacturers of traditional brands).

Through the first half of 2018, digital advertising in all of its forms grew by +23% to account for around 45% of all ad spending. Our preliminary estimate is that digital advertising grew at a slower pace in 3Q18 vs. the result recorded in the first half, with Google holding relatively steady but with Amazon, Facebook, and Oath decelerating among the largest media owners.”
Wieser says his numbers show him that radio was soft in Q3, with local down and national up. That’s in line with what we reported from radio’s public companies in the third quarter. “Local radio can remain a highly effective and heavily consumed medium for the foreseeable future, but unfortunately for its media owners, advertising budgets across all media have generally shifted towards national platforms rather than local ones. And because of that trend the historical local skew of the industry’s ad products cause radio to grow slower than it would have if the medium had evolved with a national orientation.”

Television grew around 10% including political advertising, or fell by 1% excluding political, according to Wieser. “National TV was up slightly, probably similar to 2Q18’s sub +1% growth rate. Over longer time horizons, we continue to anticipate a modest underlying rate of decline for national TV because the dominant advertisers on that medium are generally weak. Newer advertisers are not dependent enough on TV to make up the difference. Looking forward, we note that as traditional owners expand their digital advertising activities, and as digital media owners push further into “traditional” media such as ad-supported premium TV, the distinctions between these media types will become increasingly blurry, impacting the utility of forecasts for specific media types based on historical definitions of a given medium.”

Wieser says print will continue to decline by double digits