Macro uncertainty continued to drive a hazy outlook for 2021, Raymond James & Associates Analyst Aaron Kessler wrote in a research note published early Thursday.
While January is typically a “soft” month, initial indications show decelerating growth from fourth-quarter 2020 levels. Several factors will influence growth in 2021 and Q1 in particular, including the timing of an additional stimulus and Easter.
The data shared Thursday by Kessler marks the beginning of challenges that advertisers will face this year -- not only as the U.S. tries to recover from a year-long battle with a pandemic that is not subsiding, but to straddle the guidance under a new U.S. president as he tries to put people back to work during record-high unemployment rates.
Kessler published the research note after hosting a call with RJ Media Group’s digital advertising division. During the call, he wrote that RJ Media noted reduced visibility among its clients -- some global -- going into this year, as advertisers are increasingly approving budgets on a month-by-month rather than quarter-by-quarter basis.
Digital ad spend overall last year grew by about 14.5% year-over-year (YoY) in Q4, compared with 8% YoY in Q3 2020. The year saw strength in direct-to-consumer and ecommerce spend.
YouTube, Pinterest, and Snap experienced the most increase in advertising spend from the third to the fourth quarter of 2020, among the companies Kessler follows, with more modest increases for Facebook and Instagram, and slight increases for Google Search and Twitter.
Facebook and Snapchat capitalized on the trend toward shoppable and ecommerce-based ad formats. RJ Media -- positive around formats such as Instagram's "swipe up to shop" -- noted high conversion, and Snap's format innovation, particularly Originals.
RJ Media felt more cautious around Twitter. Spend grew modestly in Q4 vs. Q3, but Kessler noted that the media agency said there were platform challenges such as return on investment measurements and the perception by “advertisers that the platform fosters ‘too much drama’ with some pausing spend” until after Joe Biden’s inauguration.
Connected television (CTV) experienced strong growth, but programmatic came in lower than expected. Linear had a difficult Q4, but CTV saw continued strong growth and gained the recognition as being part of the overall TV budget.
Kessler wrote that advertisers increasingly view TV as a “holistic” program – a healthy portion of advertising expenditure attributed to OTT TV coming from "traditional" broadcaster services.
The agency was “somewhat” cautious about programmatic. While there is a place for programmatic in CTV strategies, “the agency sees a ceiling with prime inventory still done through direct deals, which tend to be more efficient for agencies and networks,” Kessler wrote.