Citing “an improved economic outlook in the U.S.,” as well as the incremental stimuli of the Olympics, The World Cup, and the Affordable Care Act, Interpublic’s Mediabrands Magna Global unit has boosted its outlook for U.S. ad spending by half a percentage point, with total volume now expected to expand 6.0% this year.
That’s a marked improvement from Magna’s last quarterly forecast issued in December, when U.S. ad spending was projected to expand only 5.5% in 2014.
Magna’s forecasts differ from other agencies in that it utilizes a bottoms-up approach, analyzing ad revenues to media companies vs. ad spending by advertisers and agencies. It projects the main beneficiaries will be TV and digital media spending.
“Television will benefit the most,” the agency‘s report notes, projecting that TV advertising will expand 8.3%, following a year of “stagnation” in 2013 -- a hammock year between two Olympic and election years -- when TV advertising actually contracted 0.6%.
“Despite a relatively low demand in the first quarter [of 2014], reflected by relatively low costs in the national TV ‘scatter’ market. That weakness of demand was partly caused by the temporary economic slowdown and possibly by the extreme weather conditions affecting the sales and marketing expenditures of three major spending categories (retail, auto, restaurants),” the report notes, adding that demand is projected to build throughout the rest of the year due to political spending and other stimuli.
“Digital” media -- including online display, search, mobile and social ad spending -- will expand 14.4% in 2014, reaching 27% of total U.S. ad spend. At its current rate of growth, Magna forecasts that “digital” will overtake TV as America’s biggest ad medium by 2018. Those categorizations may be a misnomer due to the rapid convergence of TV and online video and the blurring of lines in terms of what constitutes digital, but in the near term online video will be one of digital’s biggest drivers, expanding 25% this year, second only to social, which will expand a whopping 45%. Search will remain healthy, expanding 14.4% this year, but the Magna report includes a smoke alarm for the online display ad marketplace, which will actually contract due to the effects of programmatic audience buying.
“Non-social display formats will be hit by lower demand and a negative pricing dynamic, so that advertising sales will stagnate (0%) and even decline (-6%) on desktops,” Magna warns. “The volume of programmatic and automated buying will increase by +38% to $11 billion. By the end of the year it will represent approximately 60% of display-related digital media transactions in the U.S.”
Not surprisingly, Magna projects that print advertising will continue to erode, declining 7% in 2014, while radio will be flat and out-of-home will expand only 3.7%.On a longer-term front, Magna projects the advertising expansion to continue into next year: “Amid economic recovery and decreasing unemployment, we expect underlying advertising growth to accelerate further in 2015, at +4.6%.”