Category: Uncategorized

Massive political spending to offset 2020 ad losses, Magna forecast suggests

In 2021, finance, entertainment, technology and restaurant verticals are projected to see the healthiest ad spending recoveries, likely to range from high single- to low double-digit increases. Meanwhile, with unemployment rates remaining high, automotive and travel may continue to struggle in the new year, though Letang notes that U.S. car sales were already sluggish prior to the coronavirus pandemic.

That upward spending trend will begin to be evident through the third and fourth quarters of this year, Magna’s report says, as both Democrats and Republicans dump an unprecedented amount of money into political advertising ahead of the November presidential election.

A host of competitive congressional races across the U.S., and mass PAC investment in the Trump and Biden campaigns, will make 2020 a record-setting year, with year-over-year total political ad spending projected to be up 32 percent, or $5 billion, compared to 2016’s figures.

The race for the White House is also subject to major funding swings, such as one-time Democratic contender Mike Bloomberg’s recent promise to front $100 million to help Biden in Florida. That X factor, combined with the heavy stream of small-dollar donations many candidates have rolling in, makes this year’s already high ad spending figures harder to pin down.

Regardless of what the final figures are, it’s good news for local TV networks, who saw a sharp drop in airtime buys from brands earlier this year. 

“For local TV, typically, in September or October, if it wasn’t an election year, they would run more commercials for local car dealers and retailers and so on,” Letang says. But as the Nov. 3 election nears, “Up to 30 percent of commercials will be political in some areas [of the country].” The heaviest concentrated political ad spending will likely come in just a handful of swing states, including Florida, Wisconsin, Michigan and Arizona.

With the late-year political ad push, as well as the resumption of most televised sports, overall ad spending in quarters three and four is set to be depressed by just 2 percent year-over-year, with all of 2020 facing a net decline of 4.6 percent, the Magna forecast shows.

Originally predicting growth of 6.6. percent this year before the onset of COVID-19, the revised forecast falls short of what Magna projected at the end of March, now that the pandemic’s full effects and longevity have become clear.

In addition to a fierce political fight, this year’s other saving grace for the marketing business will be the strength of digital advertising. Now making up approximately 55 percent of the total U.S. ad market, Magna cites digital’s role as being key to softening the recession’s blow to the industry.

“The sheer size of digital advertising in 2020 … and its resilience in this economic environment explains the relatively modest decline Magna forecasts for the whole year (-4.6%) despite the severity of the economic recession,” the report states, “compared to the double-digit decline 2008-2009 (-12%) when digital media was still nascent.”

For Letang, this staying power indicates a long-term shift toward a digital-centric economic and media environment in the U.S. “Prior to COVID, e-commerce was growing by 10 to 15 percent very consistently for the past four or five years. In April and May, it was growing by 40 percent compared to previous years,” he says, noting that its growth now appears to be “permanently accelerating.”