Data from what is the best composite view yet of Madison Avenue’s media-buying behavior reveals that a slowdown in demand during the second quarter may be stalling the expansion of the U.S. advertising economy. The data, released this week by Standard Media Index, is based on actual media buys made by five of the six agency holding companies, and is estimated to represent about 75% of Madison Avenue’s buying power.
Total spending declined 1% during the second quarter, after surging 12% in the first quarter, thanks in part to a boost in spending related to the Sochi Winter Olympic Games. On balance, the two quarters combined for a 6% expansion on Madison Avenue or the first half of 2014, but the trend line is softening.
“A lot of advertisers bought spend forward to participate in the very successful Winter Olympics,” says James Fennessy, chief commercial officer of SMI, adding that incremental spending on NBC’s coverage during the first quarter may have influenced ad budgets for the second quarter.
“This has definitely impacted [spending] across the board in the second quarter, but we are also seeing a general softening in the market that is impacting all media,” he explained, adding: “We are seeing automotive, CPG and financial services all reduce spend considerably in the second quarter and this has impacted the overall results for most sections of the market.”
Among the major media, only digital and cable TV continued to expand in the second quarter, but their rates of expansion slowed dramatically from the first quarter.
Digital, which grew 23% in the first quarter, expanded only 10% in the second. Cable TV, which rose 9% in the first quarter, dropped to an expansion rate of 4% in the second quarter.
The most marked slowdown was or broadcast TV, which suffered from tough quarterly comparisons due to the presence of the Olympics in the first quarter. Broadcast network spending grew 19% in the first quarter, but fell 7% in the second. Spot broadcast TV rose 23% in the first quarter, but declined 5% in the second quarter.
No medium seems immune from the slowdown -- even high-growth digital sectors such as social, mobile and exchange-based buys.
Social’s expansion rate went from 71% in the first quarter to only 12% in the second, while mobile ebbed from a 41% expansion in the first quarter to only 8% in the second.
Exchange-based buys, which were were expanding at a rate of 10% in the first quarter, actually declined at a rate of 5% during the second -- which also happens to coincide with a period when a major holding company not part of the SMI pool, WPP’s GroupM, said it is pulling out of open exchange-based buys.
Not all companies within these sectors are suffering from the slowdown. Madison Avenue boosted its spending on Twitter a whopping 115% during the first half of the year.
“Twitter has come off a relatively small base so the number does look impressive,” acknowledged SMI’s Fennessy. “While we are still seeing solid growth in social we believe some of the heat is coming out of this part of the market and growth rates are starting to slow as advertisers now have more experience with the medium and are starting to look for a return before committing a greater percentage of their budgets.”Meanwhile, he said SMI continues to focus on growing the representativeness of its agency billings data pool, and just signed one of the largest independent media services agencies, which will begin contributing data in September. He said SMI’s pool now represents five of the six agency holding companies, and the only one not currently participating is WPP.