What’s ailing the U. S. media economy
It's a non-Olympic year but advertisers are also pulling back.
July 6, 2015

In an off-Olympic and political year, ad spending is expected to fall. That makes it a bit harder to determine whether the media economy is actually becoming sluggish or if the decreases are just due to the tough comparisons from the previous year. This year it appears to be the former. Ad spending declined by 4 percent in the first quarter of the year, but only half of that came from comparisons to spending on last year’s Winter Games. The rest reflects a general slowdown in ad spending. Advertisers remain concerned about the economy and worry consumers will pull back on their own spending. Plus, many are investing more in digital advertising, which costs less than traditional, leading to further ad spending declines. The not-so-hot start to the year led several forecasters to reduce their ad spending outlooks for 2015. To get the scoop on where the media economy really is, Media Life spoke with Jon Swallen, chief research officer at Kantar Media, for his take on why ad spending is down, whether it will rebound later this year, and why some traditional media are faring better than others.
Many of the largest advertisers cut back on advertising in first quarter. As you note, a lot of that was from the Olympics, but not all. What were other reasons for cutting back? Does this reflect uncertainty in the economy or is it reflecting the move to lower-cost digital media?
I suspect some of the dollar losses reflect money that’s moved to online video or mobile, which we don’t track.
The Olympics was significant for about six or seven top-10 advertisers. But to put it in perspective, P&G for example, their Olympics ad buy was between $50 and $55 million.
Take that off the table and there’s still a large gap between 2014 and 2015, so Olympics isn’t the only thing that’s driving it. Shifting to mobile video and other digital outlets was a big portion of the missing money.
How would you characterize the media economy right now — is it healthy? Not healthy? Somewhere in between? Why?
It’s soft.
And it has slowed down somewhat from where we were back in the middle of 2014.
Growth seems to have slowed, and I think that’s reflected in a lot of the recently revised forecasts. There seems to be a broad consensus that U.S. advertising has slowed down. Nobody’s forecasting a recession, but growth-rate forecasts have been trimmed.
That may be economic uncertainty to advertisers, but a lot of it is reallocating budgets to more cost-efficient media channels.
What are you seeing in terms of demand, pricing and spending for broadcast TV right now? Is it down or are those reports exaggerated?
I don’t have any visibility into that. We see ad pricing after the fact, we’re not in the forward looking business so I don’t have any kind of data or view on that.
You note your figures do not include mobile, video or several other forms of digital advertising. Do you think Kantar is presenting a full picture of ad spending, considering how popular those other forms are becoming? Any plans to measure them in the future? Are there special challenges in pinning down those numbers?
It does have some marginal impact, yes.
The media we are tracking and reporting on still represents a large proportion of the ad marketplace.
There are a lot of independent estimates out there about how big mobile is, and I think some of that confuses media budgets with marketing budgets. But even if mobile is 20 percent, and say video is another 5 percent, that still leaves us roughly three-quarters of the marketplace we’re still able to see.
Yes, we are planning to measure those.
We’ve been working to expand our digital ad monitoring and reporting. Paid search came into the fold this year for the first time. We’re working on video right now and have been tracking it for a while. The methodology evolves, but we nearly have year-to-year, like-for-like data.
The next one after that is mobile and we have been tracking it on a number of mobile sites and apps, but haven’t yet come up with a method to measure spending. We have to also build out a year’s worth of spending data to include it in the report.
There are challenges, definitely, with measuring these emerging outlets, particularly when it comes to programmatic or automated bidding.
The average price gets blown up when you’re talking about billions of transactions taking place. So figuring out how we handle that and normalize a report with average marketplace cost for transactions, that’s the unique challenge for digital.
It’s going to require more modeling and more averaging. I don’t think we’ll have access to every single transaction that takes place, so we have to build a representative sample of those transactions.
What’s your outlook for spot television this year? Any categories gaining or declining (beyond obvious political/Olympics)?
Automotive has been declining.
Retail is a broad category that includes furniture, department stores, groceries, etc., but as a whole spot TV budgets are flat to down for retail.
And those are two big categories for spot TV. In the case of both of those they seem to be two categories where advertisers are rapidly moving money into digital.
How is digital advertising helping out of home buck the trend of declines for traditional media?
For outdoor, digital means and refers to technology for putting ads up onto boards.
So instead of having to send workers out, you can do it like a computer monitor and load and change creative. And more inventory is being converted to digital.
It enables multiple advertisers to share the same space. Think of the idea of a TV commercial pod, we put six commercial messages in a three-minute period.
Now in OOH you can share this space on a rotating basis, and everyone pays a lower out-of-pocket cost because you’re just paying for a fraction of the audience, but it gives the operators a larger CPM. So it’s a win-win. Operators get more inventory for more advertisers, and the costs for those advertisers are lower.
I think also the visual quality of digital boards, particularly in low-light conditions like night time, makes a big difference as well.
You note there were gains in local radio during first quarter, where did those come from and why?
For local radio ad growth, as we noted, local auto dealers were a strong category.
That’s partly because, for whatever reason, I’m not sure exactly why, but local auto dealer radio budgets in Q1 2014 were somewhat lower than average. So there’s a bit of a rebound effect there-but hey, it’s still growth and it still counts.
Also, healthcare providers, which is an unsexy category, but for local media providers is an important category. It’s anything related to providing healthcare — it’s a significant part of the overall economy and with the Affordable Care Act it’s become more important.
There has been growth in marketing budgets, and because healthcare is delivered at point of purchase, it’s prime for local TV, radio, newspapers and outdoor. So that was another key category continuing to local radio growth.
Tags: 2015, 2015 forecasts, advertising, jon swallen, kantar, media economy, state of the media economy, swallen
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