Divining Media's Future From Ad Investments Made Today

Wall Street investors call it “momentum investing”: the strategy of placing bets on trends already taking shape, in the assumption that those trends are likely to continue and influence events moving forward. It’s a concept that could help divine the direction of media and advertising.

Current ad expenditure trends serve as a valid basis in applying “momentum investing” theory to media.   Ad money being spent today will undoubtedly influence what is likely to occur moving forward.

So using the most recent full year data on U.S. ad expenditure from Kantar Media, what does the concept of “momentum investing” suggest about the direction that media content production and consumption might take?

For starters, a continued emphasis on live programming would be a good bet.While full year network TV expenditures dropped 3.4% in 2013, this was due mainly to the year-to-year comparison affected by the absence of an Olympics event

Outside of this, network TV actually realized gains both from live sports programming and live entertainment programming.

There is strong advertiser demand for live TV events. And that’s not surprising. Not only does live programming generate engagement through social media, it is also less susceptible to time-shifted viewing and ad skipping.

The continued flow of ad dollars to such programming is likely to ensure increased production and distribution of it moving forward.

Additionally, and not surprisingly, spending for online display finished 2013 15.7% higher than the year before.

Display ad spend has been increasing for several years, but it is now reaching a critical mass and forcing changes in measurement and assessment, such as seen by the Media Ratings Council decision, which enables publishers to sell display advertising based upon viewable impressions.

With an estimated third of display ads going unseen, this means the cost basis for display ads will now shift from impressions served to impressions seen. 

This could conceivably lead to the CPM of digital advertising rising -- and with it, expectations that impressions alone are no longer sufficient for assessing display advertising. Instead, we may see a greater demand for understanding the impact of display ads on sales, and with it, the need for display ads to deliver not just awareness, but true branding.  Should this occur, expect to see a fundamental evolution in the creative approach to display advertising to satisfy this need for better branding.

Like display advertising, there has also been a steady long-term increase in ad dollars flowing to Spanish language media. This trend is enabling the accelerated evolution of traditionally Spanish language networks and media companies into entities targeting Hispanics with English-language programming. And chances are good the increased revenue in this segment will continue to be used for expanding programming to compete for English-speaking viewers.

Also continuing a longer-term trend, 2013 ad expenditures saw little growth for consumer magazines.  While the category as calculated by rate card prices rose 2.6%, advertising pages were down 1.95% for the year.

While magazines will continue as an important component of the media mix, continued struggles in ad expenditure growth for print editions, coupled with the opportunity and growth represented by digital media, have led publications to diversify, leveraging the strength and equity of their brands. The challenge for publications has not been their content, but their platform.  And this re-invention and reinterpretation of that content and their brand into new platforms and delivery systems is likely to continue, given current ad expenditure trends.

Another significant, yet generally under-recognized trend, has been the dividing line that continues to grow between large and medium advertisers and small advertisers, as 2013 ad expenditure data pointed out. Large and mid-size advertisers collectively accounted for 78% of all ad expenditures in the U.S. and each saw expenditures increase by 3.3% last year.  This, while small advertisers -- accounting for 22% of the overall market -- decreased their spending by 6.6%

With fewer resources available and faced with a slow growing economy, long-tail marketers have become more cautious. This may result in an ad environment that is increasingly tailored and suited to larger advertisers.

And with the increasing use of programmatic buying serving better targeted ads to larger advertisers -- using spot inventory that traditionally has offered opportunities for smaller advertisers -- smaller advertisers, when they come back into the market, may find a changed environment that where it's more difficult for them to compete.

But as we know, necessity is the mother of invention, and the current spend patterns here could certainly suggest that a next wave of innovation in advertising will come not from the largest advertisers, but by the smallest, as they use new and emerging ad tech to meet their budgets and promotion needs.

So while the future is far from certain, and momentum can always change, these are some potential directions that can be suggested by current ad spend patterns and the momentum investing of today.
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