State of the U.S. media economy: Healthy

Jonathan Barnard

The latest round of ad spending forecasts, released this week, have been somewhat tepid. While forecasters aren’t slashing their outlooks, as they seemed to do every three months during the height of the Great Recession, they’re also not overly optimistic about the coming months. Advertisers remain cautious. That coupled with the increasing shift from traditional to digital media has led to the less-than-robust ad spending growth. Still, things could be worse. Forecasters say mobile will continue to provide an ad spending spark, and social media is becoming even more popular for advertisers. And next year looks better than this one, with the presidential election poised to pump billions into television, radio and online. Jonathan Barnard, head of forecasting at ZenithOptimedia, talks to Media Life about the real health of the media economy, why his agency bumped up next year’s forecast, and whether newspapers will ever recover (surprise: the answer is maybe).

How generally would you describe the state of the media economy in the United States? Has this changed over the past year?

The overall media economy is in overall good health, thanks to a strong housing market and low unemployment. It has weakened slightly over the last year, however, hit by slowing trade with developing markets.

You did not change your outlook for U.S. spending this year but did bump it up slightly for next year. Why the change?

The continued strong growth of social media platforms, particularly their success in transitioning to mobile-first business models, has led us to nudge our forecast for social media spending up slightly for next year.

We are clearly now living in a digital age, which has changed a lot of things for media. What do you think is the most interesting trend playing out in the media economy right now? Why?

Undoubtedly the lightning-fast transition of internet advertising from desktop to mobile. We now predict that 19 percent of all U.S. advertising – traditional and digital – will be mobile in 2017, up from just 1 percent in 2011.

Newspaper spending has been on the decline for many years now. Do you think we’ll ever get to the point where ad dollars flatten out, or will we continue to see those declines indefinitely?

It’s too early to tell.

As long as consumers continue to read printed newspapers, advertisers will want to pay to reach them, especially because newspaper readers tend to be well-educated and wealthy compared to the general population.

If circulations continue to fall, however, there will come a point where the advertising and circulation revenues are insufficient to justify the printing and distribution costs.

We are nowhere near this point at the moment, but it should become clear over the next five years or so whether it is approaching.

Do you think new technology being used by broadcast, such as dynamic ad insertion, can help stem the recent declines in ad spending? What is causing this decline?

These technologies will help broadcasters maximize the value of the audiences they retain, but their fundamental problem is that they are losing viewers, particularly young viewers, to online video and other forms of digital entertainment, with a 7 percent drop in primetime network viewing in the season to date.

Is cord cutting a concern to advertisers? How much of it is just media hype?

Ultimately, cord-cutting is less of a problem for advertisers than for broadcasters, because viewers lost to traditional television can be reached through online video, which is more targetable and trackable.

However, technology is not yet able to track viewing across multiple platforms properly at the moment, so advertisers cannot make the most of viewing on connected TVs, tablets and smartphones.

Tags: ad spending, ad spending forecasts, forecasts, jonathan barnard, media economy, zenithoptimedia