Analyst Sees Return To Pre-2020 Ad Growth Rates

A U.S. advertising industry gripped by a downturn amid the coronavirus pandemic should be preparing for ad spending to return to pre-public health crisis levels in 2021, MoffettNathanson analyst Michael Nathanson predicted on Tuesday, according to The Hollywood Reporter.

"Given both the shifts in consumer behavior to e-commerce and the ability of digital to produce more targeted and efficient results, this snap-back is essentially fueled by a return to growth in digital spending at the two largest ad platforms (Alphabet and Facebook)," a bullish Nathanson argued in an investors note.

He forecast U.S. advertising growth to fall by 8.6 percent in 2020, led by a 13 percent decline in traditional spending and a 3 percent fall in online ad spending. But a digital landscape shaped by a streaming space that predates the coronavirus pandemic explains the rapid recovery forecast for next year.

Michael Nathanson

"By 2021, we estimate that digital ad spending — even excluding the TV dollars that go into the AVOD platforms like Hulu, Peacock or Pluto — will source 54 percent of all ad spending in the U.S.," Nathanson argued. Also creating a floor for the advertising industry is national TV ad buys made during the current upfronts and not easily canceled and political ad buys on local TV stations ahead of the U.S. presidential election offsetting lost advertising revenue from embattled marketing brands.

New streaming video services became a boon for U.S. advertisers before the COVID-19 crisis, with new digital behemoths accounting for big jumps in domestic advertising spending, as have digital-first marketing vehicles like Facebook, Amazon and Alphabet.

"Big picture, we see a solid bounce back in ad spending in 2021 led by +20 percent growth in online ad spending (which returns to pre-2020 growth rates), while TV spending is expected to be flat," Nathanson said of next year after a gradual "U-shaped" recovery in 2020.

Looking beyond 2020, Nathanson doesn't see the digital ad spending rebound next year coming at the expense of traditional linear TV, but having emerged as a digital outgrowth of consumers long heading online. "...Digital has grown their ad base from clients that are not entirely represented by the brand dollars that emanate from Fortune 500 TV advertisers," Nathanson argued.