Market Continues Expansion Thanks To Two Suppliers (Guess Which Two?)

The good news, according to an analysis of second-quarter U.S. ad spending is that the marketplace for all media suppliers expanded by $2.5 billion. The bad news for all but two is that those two -- Google and Facebook -- expanded by $2.5 billion to $3 billion. 

“[Google’s and Facebook’s gross revenue gains were] equal to more than the entire industry’s growth by themselves,” Pivotal Research Group analyst Brian Wieser writes in the analysis released to Wall Street investors early this morning.

That news isn’t entirely bad for the rest of the industry’s supply chain, Wieser notes -- pointing out that national TV suppliers expanded their ad revenues by about 3% during the quarter, suggesting the that the U.S. ad economy has become extraordinarily stratified with high-demand media like top-tier digital and TV expanding at a healthy clip, meaning most of the rest of the marketplace is eroding. 



Noting that national TV demand defies the belief of some observers that it is in a “permanent secular decline,” he points out that local TV has not fared so well, and has likely eroded when the incremental effect of political advertising is taken out of the equation.

So where is the giant sucking sound in the ad economy actually coming from? According to Wieser’s analysis, it’s mainly print media. Noting that radio and outdoor likely managed modest gains in the quarter, Wieser describes newspapers and magazines as being “the other extreme,” with ad revenues eroding at “double-digit” rates. 

And in another likely cannibalization by digital “publishing” -- email -- Wieser notes that “direct mail decelerated in the quarter as the U.S. Postal Service’s standard mail revenues fell by -2% during the quarter.”

So while the U.S. ad economy continues to show a healthy expansion -- 5% overall during the second quarter after factoring out the effects of political and Olympic spending -- that is an aggregate view masking an increasingly stratified marketplace of demand.

“Internet advertising was by far the fastest growing major medium,” Wieser concludes, adding: “We won’t have firmer estimates until the IAB reports their estimates for the quarter in the fall, but we can point to around +56% growth for Facebook during the second quarter vs. 58% in the first quarter and growth that likely accelerated for Google in the low 20% range year-over-year.

“These gains more than offset relatively significant deceleration for other sellers of digital advertising in the quarter.”

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