Digital Ad Spend Slows, TV Remains Champ

Standard Media Index (SMI) Tuesday unveiled ad spend and cost results for December 2016, Q4 2016 and the full 2016 calendar year. SMI total market closed December 2016 with +0.7 percent YoY increase, +4.3 percent YoY for Q4 2016 and +6.8 percent for 2016 over 2015. While the total ad market continues to grow, the rate of growth has slowed slightly (-0.8 percent) despite the fact that 2016 was an Olympic and Election year.

Digital – 2016 in Review

Over the past four years (2012 – 2015), Digital has seen a compound annual growth rate of 19 percent. When you look at the growth rate from 2014 – 2015, that number skyrockets to 26.2 percent. By contrast, the year-over-year growth rate for Digital in 2016 was only +13.3 percent (down almost 50 percent vs. prior year). This slowdown was evident throughout 2016 with Q4 seeing a +7.1 percent single digit digital growth YoY. This trend was most apparent in Retail and Telecommunication Companies cutting spend by mid-single figures.

James Fennessy

“Brands today are marketing in a digital world and we have seen the rapid growth in the sector in the past several years.  With that being said, the trajectory of digital spend has recently hit a major speed bump as brands question the efficacy of the medium,” said James Fennessy, CEO of SMI. “The big story we saw in Q4 was a recommitment to television for a number of big categories of advertisers. Retail, Telco’s and Consumer Electronics have not seen the outcomes they expected from digital and have moved back to the medium they have trusted for decades. Retailers, in particular flooded back to TV over the holiday period after moving way too much to digital in 2015.”

When you remove Facebook and Google spend from the rest of Digital, the sector’s growth drops to +8.7 percent, illustrating the dominance that the two tech giants maintain over the ad industry, particularly in mobile. Facebook continues to perform well above the growth rate of digital, jumping +83 percent for the year.  The other shining star for 2016 was Snapchat. The messaging app saw +356 percent growth from 2015 – 2016, and received more than double the ad spend by volume as Pinterest.

While some brands have slowed digital expenditures, the only two categories to decrease digital spend for the year were Telecommunications at -2.4 percent and Department Stores at -3.5 percent. Consumer Electronics was not far behind with +0.6 percent growth. These categories dialed back spend after a very significant shift into digital in 2015. If  you look at just Q4 the categories decreased digital spending by -23.4 percent and -7.8 percent respectively.

Motion Picture companies, on the other hand, have been steadily moving spend toward digital due, in part, to the realization that the consumer movie going journey now starts and ends on the digital platform. Looking at the compound annual growth rate since 2012 Movie Studios have allocated +33.6 percent more spend to digital. When isolating just 2016 you hit a high +40 percent compared to 2015. Other top digital growth categories for the year include Food, Produce and Dairy which increased digital spend by +36.5 percent, Alcoholic Beverages grew by +33 percent and Prescriptions grew by +26.7 percent in 2016.

Television – 2016 in Review

Overall, the 2016 television market saw a +4.4 percent increase in spend. Both Broadcast and Cable saw similar increases delivering +4.6 percent and +4.0 percent growth, respectively. When you exclude sports, however, the story changes. Without live sports, the overall television market only grew +1.4 percent, Cable grew +3.9 percent and Broadcast declined -2.4 percent compared to the same period in 2015. Entertainment was the only genre to see revenue fall, dropping -1.8 percent while sports grew +16 percent, due to the Olympics, with news growing +14.1 percent, thanks to the elections.

By network, NBC saw +20 percent growth for the year, benefiting from the election news cycle, the 2016 Olympics and an increased number of NFL games broadcasted. CBS grew by +3.2 percent, ABC declined by -2.2 percent and FOX fell by -4.6 percent. Univision also declined by -3.4 percent.

Looking at the top cable networks by revenue for the year – ESPN declined -2.9 percent (despite the sports boom on Broadcast), TBS grew by +1 percent, TNT fell -1 percent, USA Network also declined -2.8 percent. Cable News channels CNN and FOX News saw huge increases – +57.8 percent and +25.7 percent respectively, due to the election, and continued interest in US politics that followed. Lifestyle channels HGTV, Bravo and Food Network showed that there were some real bright spots in cable as many viewers looked to escape the election coverage. Respectively they grew +13.8 respectively, +14 respectively and +4.9 respectively.

As digital growth slows, some larger brands are putting money back into TV. For example, in 2015 Paramount Pictures decreased their TV spend by -3.8 percent they reversed this strategy in 2016 by increasing spend on TV by +24 percent. Similarly, Target reduced TV spend by -20 percent in 2015 but increased spend by +12 percent in 2016 and Progressive Insurance went from -5.5 percent on TV spend in 2015 to +6.2 percent in 2016.

Television – December and Q4

In December 2016, the overall TV market was up +5.5 percent YoY. Broadcast spend was mostly flat at +1 percent while Cable grew +9 percent YoY.

The four major broadcast networks saw mixed reviews in December – NBC saw +16.6 percent growth, due in part to new Thursday Night Football programming. CBS saw a -11.3 percent decline in ad spend, mainly due to showing one less NFL game than in December 2015. FOX grew slightly with +1.3 percent increase, and ABC saw a decline of -13.4 percent with losses in the coveted primetime entertainment category with the programming change of Scandal.

Looking at Q4 Television tells a slightly different story, the television market saw just +2.4 percent growth with Broadcast down -2.2 percent and Cable up +7.4 percent. The major broadcast networks again had mixed results with NBC up +7.3 percent, CBS down -12.4 percent, FOX up +2.9 percent and ABC down -9.6 percent.

NFL – 2016 Regular Season in Review

December 2016 brought the end to most of the NFL’s regular season games and an opportunity to reflect on how it fared with ad dollars. Overall, the average unit cost of a regular season: 30 second spot across all networks increased +6 percent over the 2015 season from $471,017 to $499,095. NBC’s Sunday Night Football led the pack with highest average cost per: 30 second spot at $614,972, a +6 percent increase in unit cost over 2015. Of the three broadcast networks to air NFL games, CBS’ Sunday afternoon games brought the lowest price tag at $406,405, but still saw an increase of +4 percent over the average unit cost in 2015. When you combine spend for all networks that aired NFL games (except NFL Network) overall revenue was up +1 percent.

“Looking further into 2017, our new AccuTV product will enable us to report the most precise ad spend picture of the National TV marketplace.  We are now highlighting trends, pricing and benchmarking in near real-time, in one place, “Fennessy continued. “Stay tuned as we roll-out first-to-market insights around ROI as we partner with a leading set top box provider as well as market research companies in half a dozen verticals. We will also shortly be providing forward booking data enabling media owners, agencies, brands and the finance community to build accurate forecasts that can drive actions to increase sales, improve efficiencies and deliver improved ROI.”

Magazines, Radio, Newspaper and OOH:

For Q4, Magazines (-7.2 percent), Newspapers (-19.9 percent) and Radio (-1.0 percent) all lost revenue compared to Q4 2015, while OOH saw a tremendous +8.9 percent increase for the quarter. A +16 percent increase in spend on Billboards is the bulk of OOH’s increase, this is compared to a -1 percent decrease in Q4 2015. A significant portion of the increase can be attributed to spend around local and national elections.

Looking at 2016 in total, Magazines (-9.1 percent), Newspapers (-13.9 percent) and Radio (-0.5 percent) saw overall declines but OOH grew with a +6.9 percent increase in spend.