MAGNA: U.S. Ad Market to Reach New High in 2018
The good news is that media sellers can expect revenue of $197 billion in 2018. MAGNA analysts say that the 5.5% increase over 2017 is the result of the strong economy and the cyclical spending related to politics and the Olympics. Without the cyclical spending, the ad market growth will be more like 3.7%. 2017’s ad market increase amounted to only 2.7%.
The driving force behind the ad increase will be digital. We can anticipate seeing digital formats commanding 50% of the ad sales. This projection eclipses MAGNA’s earlier prediction on this front by one year. In particular, spending on search, display, video and social will add up to $97 billion, reflecting a 14% increase.
Traditional media will likely experience a 5% drop to $96 billion. The bright spot in the traditional media market will be out-of-home. The 2% boost in OOH is being driven by an increasing supply of digital screens and marketer interest in reaching consumers this way.
Is the vertical divide that MAGNA first pointed to last year still a factor? Yes, analysts say. The trend may be more noticeable than before. Look for verticals like CPG, pharmaceuticals, restaurants and movie marketers to continue their use of traditional media. The verticals that rely on digital, like technology companies, telecommunications and travel operators, will increase their commitments to digital advertising.
This divide is particularly acute in national TV ad sales, a format which commands big money – more than $40 billion. In fact, slower revenue gains in some of these industries, like automotive and QSR, mean that fewer ad dollars will come to national TV. Meanwhile, digital-heavy companies also will cut back on national TV ads, in favor of digital. All these factors likely will result in a drop of 2% in national TV ads in 2018.
Marketers in high-growth industries are showing their willingness to spend on ads. However, they’re following the consumer shift to digital formats.