- Media anticipates a great spending year in 2020
- Political spending in the U.S. will rise 59%
- There are risks for static corporates and agencies from digital growth
- The perennial weak spot will be advertising in newspapers
The advertising, communications and media sectors endured a torrid time during 2017 and 2018. This was not to be unexpected as those were the first two years post what media refers to as the “Major Quadrennial”.
This term is used for the year marked as the peak of global media outlays as it features the following high media spending events:
- U.S. Presidential Election
- 2. Summer Olympic Games
- 3. UEFA European Football Championships
Well, I am pleased to say we have arrived at this peak spending year again with:
- American elections on Tuesday, November 3
- 32nd Summer Olympic Games in Tokyo from Friday, July 24 to Sunday, August 9
- UEFA Euro 2020: Friday, June 12 to Sunday, July 12
Magna Global, a media consultancy forecast that global advertising spending is expected to rise by 5% this year and spending on digital messaging will gain 11% to a figure of $338 Billion. That will make worth just over 50% of the total advertising spend for the year.
Most of this will be directed to mobile advertising as display advertising linked by algorithms to searches on smart phones will be valued at $126 Billion.
One reason for this specific growth this year is driven by the fact that there is increasing smart phone usage in India. Back in 2015 there were just 199 Million smart phone users based within India. That figure is forecast by Statista to reach 402 Million this year and rise to 443 Million in 2022. With the T20 Cricket World Cup being held in Australia from Sunday, October 18 to Sunday, November 15 there is a massive opportunity to get messages in front of many millions of cricket loving Indians.
Hey Big Spender
The largest area for media spending will be the election in the U.S.
Indeed, these appear to have been running through most of 2019 as the Democrats seek to find a nominee that can take on Donald Trump.
GroupM suggest that media companies are expecting a significant windfall in political advertising to the tune of $10 Billion as industry analysts forecasting a record amount being spent by candidates. Local television is expected to be the largest recipient, but candidates are continuing to invest more ad dollars in other media. That would equate to an increase of 59% over 2016.
BIA Advisory Service estimates $6.55 Billion will be spent on local political advertising in 2020, with over-the-air (OTA) TV receiving the largest share of $3.08 Bbillion. This represents a potential 16.5% of total local broadcast TV advertising revenue for 2020. Digital media is forecast for 21% of political ads, cable TV 14% and radio nearly 5%.
Cross Screen Media and Advertising Analytics estimates the video advertising market for politics will grow by 50% from 2018 to 2020, reaching a projected $6 billion. The study estimates political advertising will account for 4-5% of the total video ad dollars and account for 17% of total growth. Local broadcast TV is expected to get a lion share of the political ad dollars with stronger ad growth from digital media and local cable.
Digital advertising has now truly moved out of its silo and has become mainstream. Many corporate clients have renamed a key role to embrace this fact so one now can often meet the “Chief Marketing and Digital Officer”. This reflects the fact that successful brands, that wish to remain at the top and be “future fit” acknowledge that they must be fully digitised.
Streaming Is Steaming
Streaming will see a new intensification in the battle for paying customers when Disney debuts in the U.K. on Tuesday, March 31. It will take the fight straight to Netflix and Amazon Prime Video. This area is proving troublesome for the advertising industry as many of these streaming services do not carry advertising.
Conventional television watching has faded fast as most households record programmes and skip past advertising messages. There is still s premium to be paid for the slots that start and end an “ad break” as for many viewers that is when they start and stop the fast forward function. Those few seconds of seen imaging carry a premium price. The other key area is ad spending during live sports events.
The clear message is that advertising agencies must adapt. Leading names such as Publicis Groupe, (France), Dentsu (Japan) and M&C Saatchi (U.K.) have all warned of poor trading pre-Christmas 2019.
So, to avoid being bypassed completely the agencies need to be nimbler, improve their consultative power and offer more detailed strategic solutions.
No Go Newsprint
One area that is not looking good is advertising in newspapers. Just 7% of global ad spending will go to the traditional print of daily newspapers. The print daily newspaper circulation worldwide in 2018 was 536.6 million units. This was around 700 thousand copies less than a year earlier.
Figure 1: Degree of Digitisation and Projected Revenue Growth Source: PWC
Figure 1 illustrates the fact that the U.S. dominates the migration of newspaper sales to digital format with other Anglo-Saxon economies i.e. Australia, U.K. and Canada in the same position, if not with the same scale.
The WAN-IFRA’s annual World Press Trends survey sees this trend continuing the -2% year-on-year pattern that has been in place for the past decade. Overall, global newspaper ad revenues declined by 7%, a slightly smaller rate than the 7.5% drop seen in 2018. Over the past 5 years (from 2014 through 2018), global newspaper advertising revenues have fallen by 21%.
So, where does this leave the investor? It will be up to the individual to determines whether they wish to invest in a well-established advertising agency such as WPP Plc (WPP) or to look at other media outlets such as Walt Disney (DIS) or Twenty-First Century Fox (FOX).
As a sector, overall, I sense that the media market is set to book gains in the coming year, Figure 2 illustrates that the Spotlight Communications Index formed a new, impulsive channel has formed in 2019 lifting the sector by 18.5%. I expect again of at least that again in 2020.
Figure 2: Spotlight Communications Index Source: www.investing.com, Spotlight Group