An influential Wall Street analyst this morning predicts the industry’s dominant players will report strong second-quarter results this week, but warns that digital’s incremental advertising boon may be poised to stall.
“There are many reasons to look at digital advertising through a negative lens at the present time,” Pivotal Research Group’s Brian Wieser writes in a note sent to investors this morning.
“Digital advertising has had many problematic elements placed in the spotlight over the past few years (i.e. measurement, attribution problems, potential consumer toxicity, brand safety issues, market dominance by two companies, etc.), and many marketers are only now catching up to them. On the other hand, as we have written previously, for ad-supported media, problems are par for the course.
“If Winston Churchill had been a media planner focused on large brands,” Wieser concludes, “he would have said that television was the worst form of advertising except for all those others which had been tried. It would be equally apt to apply that sentiment to digital advertising had he worked as a planner for marketers dependent on those channels as well.”
Wieser has long been a supporter of the underlying value of TV advertising mass reach for big brands and their agencies, so it’s interesting that his new warning comes about the same time many forecasters predict digital is overtaking TV’s share.
“The biggest single issue that we think causes us to look at the group more negatively vs. other analysts is that we firmly believe that there are increasingly real limits to growth for digital media,” Wieser explains.
“It is difficult for marketing budgets not associated with media to get deployed into paid media, and it seems unlikely that the emergence of direct-to-consumer brands and other e-commerce platforms should cause a change in the overall trajectory of paid advertising. Digital advertising can take an increasing share of an advertising 'pie' that grows at a relatively predictable pace, but media such as TV, radio and outdoor are not going to evaporate to make room for digital to take 100% of the industry’s share.
“Consequently, we don’t think digital advertising can grow enough to support implicitly optimistic expectations for the sector, and we doubt that non-advertising businesses can make up the difference for companies we cover.”