Strong Digital Sales Drive Ad Growth

According to a new report from Magna, U.S. ad revenue will reach an all-time high this year, growing by 3.6% to reach $185 billion, roughly even with the IPG Mediabrands agency's June forecast of 3.4% growth this year, excluding the impact of cyclical events such as political campaigns and the Olympics.

Vincent Letang, executive VP of global market intelligence and author of the report, says that despite the new high on the horizon, the market is actually seeing smaller growth than last year, according to Magna's new report Wednesday. After ad spending contracted by 20% from 2007 to 2009, it didn't completely rebound to 2007 levels until 2015, and didn't surpass them until 2016.

Michael Leszega, senior analyst, market intelligence at MagnaDigital, points out that ad sales grew by 17% in the first half of 2017, as Google and Facebook continue to account for the vast majority of ad revenue growth, constituting about 70% of the total digital ad market.

National TV ad sales, the report said, are being hit by "dwindling spending" from four of its top ten verticals, including food, finance, automotive and movie releases, which are adjusting marketing and advertising spend to plateauing or declining sales year-to-date.

Though the U.S. ad market appears to remain strong, holding companies don't seem to be, says the report. WPP last month posted surprisingly weak quarterly results, for example, along with a disappointing forecast. It blamed spending cuts by major packaged-goods marketers.

But some have pointed to the possibility of fallout from last year's Association of National Advertisers report firm K2 on media transparency. K2's report alleged that media agencies were regularly taking incentives from vendors without passing the benefits back to advertisers, says the report.

"It's hard to believe that it hasn't had some impact in terms of clients looking to tighten up contract language," Brian Wieser told Ad Age. "This is reinforced by my conversations with marketers who have only recently learned about how their contracts have allowed for agencies to generate authorized, but undisclosed, markups. But I also think that a slowdown in spending on media from large marketers is at play, as is zero-based budgeting…" concludes Wieser.

For additional information from AdAge, please visit here.


Next story loading loading..