Magna released a bullish assessment and forecast for US ad revenue in 2018 and 2019. The report covers all the major advertising and media categories including both digital and traditional media.
Ad sales up, especially digital. Magna says that “net advertising sales” will grow by 6.9 percent this year to reach $207 billion, which is “a new all-time high.” And, for the first time, digital ad revenues surpassed 50 percent of total ad spending in the US. The company said that digital ad revenue in 2018 will reach $106 billion, or 51.5 percent of total ad sales.
Digital advertising on mobile devices accounts for roughly two-thirds of all digital ad spending, representing a 30 percent growth rate year over year. Magna says that mobile now exceeds TV and is twice desktop ad revenue. Accordingly, the firm predicts that desktop ad revenue will decline by 4 percent based on declining usage and ad blocking.
Magna ad spending estimates by category (2018 – 2019)
- Digital advertising will reach several important milestones this year: revenues will pass the $100bn mark ($106 billion), and account for half of total US advertising sales for the first time (51.5% exactly). Mobile digital advertising (ad sales generated through smartphone impressions and clicks) will grow by +30%this year to approx. $70bn, which is now more than television and twice as much as desktop-based revenues, reflecting the ever-growing role smartphones have taken in our lives. Meanwhile, desktop-based ad sales will decline by -3.9% hit by lower consumption and by ad blocking.
- Cyclical events will drive $4.3bn of incremental advertising dollars this year. Political advertising is expected to bring $2.9bn into television, an increase of +19% vs 2014, as well as $400 into direct mail, as more House races are expected to be competitive than initially thought (105 races this year compared to 70 in 2014). This will come on top of the Winter Olympics and the FIFA World Cup, which have already generated $630 million and $200 million of incremental national TV revenues respectively.
- Advertising revenues grew by an impressive +6% in the first half of 2018 (excluding cyclical events). 1Q18 was the strongest quarter in two years (+6.5%) and 2Q18 was almost as strong (+5.8%). A robust economy and the developing digital economy have been fueling advertising spend from most industries. Finance, Pharma and Technology were the main drivers of growth in the first half of the year, increasing ad budgets by +15 to +20%. As comparables become harder in the second half, MAGNA is expecting growth rates to slow down slightly, yet the second half is still forecast to grow by +4.2%.
- Digital media continued to show impressive revenue growth in the first half: search revenues grew by +18%, social media ad sales by +38%, and online video ad sales by +27%. Meanwhile television ad sales were flat when neutralizing cyclical effects (+3% overall). Local TV ad sales were flat (-5% stripping out incremental political spend). Print ad sales were down -16% and linear radio ad sales were down more than -5%, as local radio pricing continues to decline. Out-Of-Home had a strong half, with cinema advertising up +12% and the rest of OOH (billboards, transports, malls, and street furniture) up +3% year-over-year.
- Advertising revenue will grow by +6.9% on a full-year basis in 2018, but digital media formats will capture most of the growth once again. Digital ad sales will grow by +16%. Social media will be the fastest-growing segment again, with advertising revenues growing by +38%, but Search and Digital Video are also showing robust growth with expected increases of +16% and +25%, respectively.
Search, social and video lead the way. Among digital formats, Magna called out paid search, social media and online video advertising, which grew by 18 percent, 38 percent and 27 percent respectively. Connected TV, as a subset of video, saw revenues grow 40 percent to reach $2 billion.
Most traditional media channels (TV, print, radio) were down, with the exception of out-of-home (OOH). Within the latter category, cinema grew by 12 percent and the rest of OOH by 3 percent.
Ad revenue growth happened across industries. But Magna highlights Finance, Pharma and Technology as the largest spenders in the first half of 2018. Compared with 6 percent growth overall in the first half, these industries grew their ad budgets by 15 percent to 20 percent.
Magna expects 4 percent overall ad sales growth in 2019.
Why it matters to marketers. The report suggests that already hot (mostly digital) channels and formats will continue to thrive, which may drive up prices further. There may also be buying opportunities in some traditional media channels, where prices are falling because of shrinking demand.