Enhanced targeting capabilities are driving accelerated investment by national marketers in local media, according to BIA/Kelsey analysts’ local marketing and media predictions for 2017.
National advertisers are already the largest investors in local media, compared to either small and medium-sized businesses (SMBs), or regional advertisers.
National advertisers accounted for $56.3 billion, or 40%, of total local advertising spending of $141.3 billion in 2015, and $61.2 billion, or 42%, of total local advertising spending of $146.6 billion in 2016.
By 2020, BIA/Kelsey forecasts that national advertisers’ investment will account for $73.4 billion, or 44%, of $168.9 billion in total local advertising. That works out to a total investment increase of $17.1 billion, or 30%, between 2015 and 2020, and a rather impressive compound annual growth rate (CAGR) of 5.4%, noted the company’s managing director, Rick Ducey, in a webinar highlighting key 2017 predictions.
Based on conversations with national marketers and their agencies and local media companies, it seems clear that the significant growth in national advertiser investment at the local level — which “surprises a lot of people” — is being driven by demonstrable ROI resulting from enhanced targeting, said Ducey.
“There’s more usable data — and not just media consumption data, but household matching and all kinds of data augmentation strategies and platforms,” he said. “Marketers are better able to target or find their consumers within media audiences using advanced planning and buying tools, and better able to measure the results. They’re better able to measure some KPIs, although tracking conversion in offline media is still tough.”
Advertising spending among SMBs (defined as having an employee headcount of up to 99) is also expected to see healthy growth, although not matching that of national advertisers.
SMB investment rose from $50.3 billion to $52.6 billion between 2015 and 2016, and is projected at $53.7 billion in 2017 and $60.9 billion in 2020. That’s a projected total increase of $10.6 billion and a CAGR of 3.9% between 2015 and 2020.
Meanwhile, regional advertisers’ spending will remain more or less flat: It totaled $34.7 billion in 2015 and $33 billion in 2016, and is projected to hover at around $33 billion until 2020, when it’s projected at $34.6 billion.
Ducey notes that national marketers and their agencies would be wise, in planning media mix strategies, to consider that their competitors may be moving toward more local activations and investment.
Local media, for their part, can benefit from focusing on selling advertising to the national and SMB growth segments, rather than the flat regional sector, he pointed out.
A Positive Local Television Outlook
Looking specifically at the local television outlook (BIA/Kelsey continuously tracks advertising in 16 traditional and nontraditional media channels), the company’s chief economist, Mark Fratrik, noted that while stations’ overall ad revenue in 2017 is expected to decline in relation to 2016, which was boosted by election advertising, economic conditions bode well for continued advertising growth for “core” stations within markets.
The 2017 forecast calls for over-the-air (OTA) or broadcast television to account for 13.3% of total local ad revenues of $148.8 billion — second to direct mail (24.9%). Online/interactive advertising is third, with 12.5%.
While mobile and online advertising spending will exceed local television ad spending over the next few years, local TV stations will continue to be an important part of the media mix, Fratrik said.
And while online advertising through television station offerings is projected at just 0.7%, he stressed that stations are expanding those offerings and becoming better at selling them.
Also, the ATSC 3.0 transmission technology that will become the standard within two to three years, once it has worked its way through the regulatory process, will open up even greater local-station opportunities, he said. Because local stations have a strong financial foundation, they’re well positioned to take advantage of the new opportunities in targeted advertising, targeted content, mobile services, subscription services, more channels, greater capacity and second screen, he said.
“Clearly, mobile is a major focus for TV stations” now and going forward, Fratrik said. “The ability to target consumers by location is incredibly attractive. Stations are moving and repurposing a lot of their content to their Web sites and mobile apps. Many television sellers are talking about their weather apps on local phones, for example. They have no difficulty in getting hundreds of thousands of hits, and no difficulty in selling sponsorships.”
(In another new report, devoted to mobile, BIA/Kelsey estimates that annual U.S. mobile ad spending will grow from $33 billion in 2016 to $72 billion by 2021, for a 17% CAGR, and that the location-targeted portion of overall mobile ad spend will grow from $12.4 billion to $32.4 billion in the same period.)
Some local stations are also leading the way in offering — and even developing — their own OTT services, Fratrik noted.
“As would be expected, the stations are going where the consumers are going,” he summed up.
The report, “What’s Next? BIA/Kelsey 2017 Analyst Predictions,” can be purchased on the company’s online store. The report on mobile advertising trends is available for free download from the site.