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Magna Report Forecasts 2018 Ad Sales to Reach Record High of Over $200 Billion

September 20, 2018 // In the News

by .  Published by ADWEEK on September 20, 2018.

Half of that revenue expected to be in digital for the first time

Magna sees total U.S. advertising sales hitting $207 billion in 2018.
iStock

Magna, IPG Mediabrands’ intelligence unit, predicted in a report today that full-year advertising sales in the U.S. will pass the record $200 billion mark. For the first time, digital is also expected to account for half of those sales (up 16 percent to approximately $106 billion in revenue).

The report showed total U.S. advertising revenue growing by 6.9 percent to $207 billion. Total domestic ad sales grew by 6.5 percent in the first quarter of 2018 and 5.8 percent in the second quarter due to “a robust economy” and an uptick in ad dollars being spent by companies in the finance, pharmaceutical and tech sectors, according to Magna.

Vincent Letang, executive vice president of global market intelligence at the firm, said the record domestic advertising revenue growth is being fueled by “rising wages, low unemployment [and] record retail sales,” leading “marketers in many verticals, but not all, to increase their ad budgets in the first half.”

Marketers in auto, movies, restaurants and telecom, on the other hand, decreased their advertising budgets, as per the report.

Magna predicted record growth will also be driven by political ads around the midterm elections, which are expected to bring $2.9 billion into television—an increase of 19 percent since the last round in 2014 (there are 105 races this year compared to 70 that year). This adds to the sales already gained during the Winter Olympics and FIFA World Cup, which generated $630 million and $200 million of incremental national TV revenues, respectively, the report said.

Still, all non-digital advertising sales in the U.S. are estimated to decrease 4.6 percent this year with national TV expected to only grow by 0.8 percent to $42.7 billion, the report said. Magna sees local TV ad sales climbing 9 percent in 2018 (thanks to the midterm elections), out-of-home growing 3 percent, print declining 17 percent, radio decreasing 5 percent and direct mail remaining stable due also to political ads.

In the first half of 2018, print U.S. ad sales declined 16 percent, linear radio was down 5 percent, out-of-home grew 3 percent and TV remained flat. Meanwhile, digital search was up 18 percent, social media rose 38 percent and online video increased 27 percent, according to the report.

“The development of digital ad formats, especially search and social, is also bringing new spending from small, local entrepreneurs” who previously rarely or never placed ads in traditional media, Letang told Adweek.

He said “one shouldn’t link too closely the stagnation of TV advertising sales with the growth of digital,” because increasing digital sales are coming from businesses like “your local plumber or bar” on social media. Magna predicted social to “be the fastest-growing segment” in the U.S. and increase by 38 percent in all of 2018, while search and digital video will rise 16 percent and 25 percent, respectively.

Social media companies like Snapchat and Facebook, and video and streaming companies including Netflix, Hulu and YouTube, have actually “increased their use of traditional media, especially in TV and out-of-home, as they are developing into household brands,” Letang explained, adding that key big spenders in spaces like CPG, beverage and pharma so far have stayed “loyal” to television.

Letang said “that helped national TV to stabilize ad sales in the first half,” versus the slip of 2 percent it saw in the same period last year.

The report said domestic desktop-based ad revenue is expected to decline 3.9 percent after being “hit by lower consumption and ad blocking.”

Magna projected digital ad sales in the U.S. to hit $163 billion by 2023 with mobile accounting for half of all ad revenue by 2022 ($126 billion). By 2022, the report saw digital video capturing half of all video ad sales and reaching $116 billion in revenue by 2023.

Letang added that in certain markets, digital advertising sales already account for half of all ad revenue, including in the U.K., where they make up around 65 percent.

Magna also increased its underlying growth for the year to 5.2 percent compared to its last forecast in June that placed it at 4.7 percent. That revised forecast was “triggered by a stronger-than-expected market” (which grew by 6.1 percent) in the first half of the year. The 2019 forecast was also revised up to a 4 percent underlying growth from 3.6 percent.

Read the full article

MAGNA Advertising Forecasts (Fall Update – Executive Summary)

September 20, 2018 // Press Releases

US Advertising Hits All Time High

Ad Spend Grew by a Robust 6% in the First Half, Driven by a Finance, Pharma and Tech Spending;

Full Year Ad Revenue Expected to Pass $200 Billion Mark; Digital Reaches 50% Market Share

 

KEY FINDINGS

  1. Media owners net advertising sales (NAR) will grow by +6.9% in 2018 to reach $207 billion, a new all-time high. Neutralizing the advertising sales generated by cyclical even-year events (Winter Olympics, FIFA World Cup, Mid-Term Elections), 2018’s underlying growth will be +5.2% compared to +4.9% in 2017. MAGNA expects advertising growth to continue in 2019: +4.0% (excl. cyclical events).
  2. MAGNA increased its 2018 growth forecast by half a point since the last update, from +4.7% (June Forecast, excluding Cyclical Events) to +5.2% (September Forecast). The upward revision was triggered by a stronger-than-expected market in the first half (+6.1%) and robust macro-economic forecasts. The 2019 forecast was also raised due to continued expectations for economic strength, from +3.6% to +4.0% (excl. cyclical events).
  3. Digital advertising will reach several important milestones this year: revenues will pass the $100bn mark ($106 billion), and account for half of total US advertising sales for the first time (51.5% exactly). Mobile digital advertising (ad sales generated through smartphone impressions and clicks) will grow by +30%this year to approx. $70bn, which is now more than television and twice as much as desktop-based revenues, reflecting the ever-growing role smartphones have taken in our lives. Meanwhile, desktop-based ad sales will decline by -3.9% hit by lower consumption and by ad blocking.
  4. Cyclical events will drive $4.3bn of incremental advertising dollars this year. Political advertising is expected to bring $2.9bn into television, an increase of +19% vs 2014, as well as $400 into direct mail, as more House races are expected to be competitive than initially thought (105 races this year compared to 70 in 2014). This will come on top of the Winter Olympics and the FIFA World Cup, which have already generated $630 million and $200 million of incremental national TV revenues respectively.
  5. Advertising revenues grew by an impressive +6% in the first half of 2018 (excluding cyclical events). 1Q18 was the strongest quarter in two years (+6.5%) and 2Q18 was almost as strong (+5.8%). A robust economy and the developing digital economy have been fueling advertising spend from most industries. Finance, Pharma and Technology were the main drivers of growth in the first half of the year, increasing ad budgets by +15 to +20%. As comparables become harder in the second half, MAGNA is expecting growth rates to slow down slightly, yet the second half is still forecast to grow by +4.2%.
  6. Digital media continued to show impressive revenue growth in the first half: search revenues grew by +18%, social media ad sales by +38%, and online video ad sales by +27%. Meanwhile television ad sales were flat when neutralizing cyclical effects (+3% overall). Local TV ad sales were flat (-5% stripping out incremental political spend). Print ad sales were down -16% and linear radio ad sales were down more than -5%, as local radio pricing continues to decline. Out-Of-Home had a strong half, with cinema advertising up +12% and the rest of OOH (billboards, transports, malls, and street furniture) up +3% year-over-year.
  7. Advertising revenue will grow by +6.9% on a full-year basis in 2018, but digital media formats will capture most of the growth once again. Digital ad sales will grow by +16%. Social media will be the fastest-growing segment again, with advertising revenues growing by +38%, but Search and Digital Video are also showing robust growth with expected increases of +16% and +25%, respectively.
  8. Meanwhile, non-digital advertising sales will decrease by -4.6% this year. National TV NAR will grow by +1% (excl. cyclical -1%) and Local TV ad sales will increase by +9% (excl. political: -4.5%). Out-of-Home ad sales will grow by +3% while Print and Radio ad revenues will decline by -17% and -5% respectively. Direct Mail sales will be stable thanks to political revenues (-0.3% overall, -2.1% excl. political).
  9. Advanced TV advertising keeps growing, as it brings the power of a traditional big screen linear experience augmented by superior targeting abilities. Household Addressable campaigns represent approx. $800 million while Over-the-Top, IP-delivered campaigns are growing by +40% per year to reach $2bn this year.
  10. As the economic outlook remains strong for 2019 (GDP +2.8% according to the Philadelphia Fed’s SPF survey), MAGNA anticipates a tenth consecutive year of growth for the US advertising market. Growth rates will slow to +2.3%, due to the lack of cyclical events or +4.0% on a normalized basis (a mild slowdown vs 2018’s +5.2% growth).

 

According to Vincent Létang, EVP, Global Market Intelligence at MAGNA and author of the report:

“The advertising economy showed robust growth in the first half, as the strong economic environment benefits key sectors like Finance, Technology and Travel. Digital media was the big winner again, but national TV revenues were also stronger, stabilizing after six quarters of erosion, helped by strong spending from Pharma and Food/Drinks, and strong pricing. Meanwhile local TV, radio and print continue to struggle with weak local media spend (e.g. auto) and poor pricing.”

 

This is an Executive Summary from the Fall Update of MAGNA’s US Advertising Forecasts, updated quarterly. Next update (US and Global): December 2018. MAGNA’s market research publications include dozen of reports on advertising spend, advertising costs, advertising growth, media consumption, and advertising technology (programmatic), analyzing the US and 70 countries. To learn more about MAGNA, or to access the full report and dataset, contact Vincent.letang@magnaglobal.com.

 

OTHER FINDINGS

First Half Overview

Advertising revenues grew by an impressive +6% in the first half of 2018 (excluding cyclical events). 1Q18 was the strongest quarter in two years (+6.5%) and 2Q18 was almost as strong (+5.8%). A robust economy and the developing digital economy have been fueling advertising spend from most industries. Finance, Pharma and Technology were the main drivers of growth in the first half of the year, and represented advertising budget increases of +18%, +17%, and +19% respectively. Meanwhile, the number one advertising vertical, Retail, grew ad spend by +4% year-over-year. Personal Care and Telecoms budgets were flat. Only three sectors reduced advertising activity this year to date: Automotive (-8%), Movies (-4%), and Restaurants (-4%). As comparables become harder in the second half, MAGNA is expecting growth rates to slow down slightly: the second half is still forecast to grow by +4.2%.

Television

National TV advertising sales will grow by +0.9% this year (excl. cyclical: -0.8%) to $42.7 billion. Normalized growth (excluding cyclical) stabilized at last in the first half (1Q: +0.4%, 2Q: -0.6%) after six consecutive quarters of negative growth. The story is similar across segments, with strong pricing (still around +10% per year for prime time) barely compensating for the erosion of ratings (between -8% and -15% for most quarters). Key verticals like Food/Drinks and Pharma remain loyal to TV and have expanded their budgets in the first half.  An increasing number of brands are being priced out of primetime or network TV altogether as years of scarcity-driven inflation has pushed the average primetime CPM to an all-time high close to $50, forcing brands to look for affordable alternatives for their video branding campaigns (non-linear TV, OTT, digital, syndication, and cinema). On a full year basis we expect English-speaking broadcast networks NAR to decrease by -2.0% (last year -2.8%), cable networks by -0.4% (last year -1.7%), and Spanish-Speaking networks by -4.0%. Syndication advertising revenues are expected to grow by +1.8% (last year -1.4%) as many brands, e.g. in CPG and Restaurants are diversifying away from network or cable.

Local TV NAR is expected to grow by +9.1% this year to $21.5bn thanks to three billion dollars of incremental ad sales generated around mid-term elections. Political revenue is predicted to increase by almost +20% vs. the previous mid-term, as more house and gubernatorial races are deemed “competitive” (about a hundred House races vs. just 70 in 2014). Without political revenue, underlying normalized decline would be -4.4%, showing a worsening trend (2017: -3.6%) partly due to low automotive spending and weak pricing.

Advanced TV advertising keeps developing, as it brings the power of big screen linear experience with superior targeting capabilities. Ad spend around non-traditional TV campaigns is increasing significantly this year. Set-top-box-based addressable campaigns on cable networks will reach $815 million this year, up by +28% from last year. OTT advertising (video impressions served on TV screens through internet connections into linear or on-demand shows) will reach just over $2 billion this year (+40%). This is a reflection of the rapid growth in addressable and on-demand video technology penetration: this year 84 million homes will be reachable through non-traditional TV campaigns. Brands are using data and technology to enhance their TV campaigns, improving targeting, reducing waste, increasing relevance, and better understanding how, when, and why consumers are viewing content. Ad spend remains small compared to the entire TV advertising market ($63 billion), however. This is because while addressable campaigns and OTT give significant additional information in terms of measurement, attribution, and analytics, brands don’t want to sacrifice traditional TV success metrics like reach, scale, and cost. Finding the right balance between the old and new can be difficult in this uncertain time in the TV landscape.

Digital Media

Digital media continued to show impressive revenue growth in the first half: search revenues grew by +18%, social media ad sales by +38%, and online video ad sales by +27%. Despite the concerns about brand safety and accountability from many brands and despite the fact that some CPG brands did actually cut down on digital spend in recent months, advertising revenue growth barely slowed down compared to last year. This is likely due to the long tail of small, local, direct advertisers who don’t share big brands’ concerns and keep increasing their budgets. Search spend growth is now mostly driven by pricing while online video is mostly driven by usage/volume, and Social is driven by both.

As digital advertising sales grow by an estimated +16% on a full-year basis, they will reach two important milestones this year: revenues will pass the $100bn mark ($107 billion) and account for more than half of total US advertising sales for the first time (51.5% exactly).

Mobile digital advertising (ad sales generated through smartphone impressions and clicks) will grow by +30% this year to approx. $70bn, which is now more than television and twice as much as desktop-based revenues, reflecting the central role smartphones have taken in everyone’s lives. Meanwhile, desktop-based ad sales will decline by -4.5%, hit by lower consumption and by ad blocking.

Audio

Linear radio advertising sales fell by -6.7% in 2Q18. Network radio ad sales increased by +1.8% as they benefit from budget re-allocations caused by the rising cost of national TV. Meanwhile local radio stations ad sales decreased by -7.5% in the quarter due to declining audiences and weak pricing. MAGNA expects total linear broadcast radio ad sales to decline by -4.7% this year, to $13.2bn.

There’s been a noticeable slowdown in digital audio ad sales since Pandora introduced a $9.99/mo ad-free tier in 1Q17. Total digital audio ad sales (pure streaming players + broadcasters) grew by just +3.3% in 2Q18 compared to +16% two years ago. As a result, digital advertising growth can only partly mitigate the declining linear ad revenues for the audio media industry as a whole. MAGNA expects an overall decline of -3.2% in 2018 when factoring in digital sales.

Publishing

Print-based ad sales (newspapers and magazines) decreased by -16% in the first half, due to the erosion of readership and the competition of digital media. National newspapers were slightly more resilient but local papers (the bigger segment by far) did worse. For full-year 2018, MAGNA expects print ad sales to decrease by -17.2% to $14.9bn, with a similar trend for daily newspapers (-18%) and magazines (-16%).

Digital ad sales now account for a third of publishers’ advertising revenues. They are growing by +7% this year, which is far below the growth rates of native internet ad formats (search, social) and not nearly enough to offset the declines from the legacy print-based ads. Combining paper ad sales and digital ad revenues, publishers will experience an -11% decrease in total ad revenues this year.

Out of Home

OOH advertising revenues are expected to grow by +3% to $7.4bn in 2018 (excluding cinema) – a new all-time high – following strong growth (+4.1%) in the second quarter. 2Q18 was the strongest quarter in four years, thanks to a combination of +15% growth from digital OOH inventory (DOOH), and a +2% increase for static traditional inventory.

Across OOH segments and environments, Street furniture and Transit are driving growth this year, with ad sales that are expected to increase by +6% and +9% respectively. DOOH ad sales will grow by +13% in 2018 and +14% in 2019 driven by new digital inventory, including hundreds of digital screens to be installed in New York public transports and subway stations by Outfront starting next year.

Cinema advertising revenues grew by +12% in the first half, after declining by -6% in 2017. The recovery was caused by solid box office in 2Q (+24%) driven by the success of Avengers: Infinity War. Cinema is also becoming increasingly attractive as an alternative or complement to national television, where costs keep rising by +10% per year and where the light TV viewers of the YouTube generation are increasingly hard to reach.

Direct Mail

Direct mail advertising revenue increased by +0.8% in the second quarter of 2018, including political mail. Standard mail revenues were up +1.5% and first class mail revenues were down -4.5%. Excluding cyclical political spending, revenues would have been -1.0% yoy. On a full-year basis, MAGNA is expecting direct mail revenues to be stable this year: -0.3%, or -2.1% excluding political).

Looking forward, the long term shift away from traditional mail and toward digital marketing will continue to push volumes down by -3% to -6% per year. We believe price increases won’t fully compensate for declining volume, leading to revenues decreasing by -2% to -5% per year in the next five years.

Despite the growth of digital budgets, political mailing budgets remain very significant and generate a noticeable boost in election years. USPS will generate approx. $400m in political related revenues this year – slightly more than it did four years ago in the previous mid-terms (2014).

KEY FIGURES

2018 Size
($m)
Market
Share
2018 Growth (NEW) 2018 Growth (PREV) 2019 Growth

(NEW)

2019 Growth (PREV)
TOTAL OFFLINE (excl. CE) 96,614 46.7% -4.7% -4.6% -4.7% -4.7%
National TV (incl. CE)  42,691 20.6% 0.8% 0.2% -3.1% -3.6%
National TV (excl. CE)  41,942 20.3% -0.9% -1.4% -1.5% -2.0%
Local TV (incl. CE)  21,535 10.4% 9.1% 9.9% -15.6% -14.7%
Local TV (excl. CE)  18,540 9.0% -4.4% -3.4% -4.5% -3.7%
Print  14,890 7.2% -17.2% -16.9% -17.9% -17.8%
Radio  13,178 6.4% -4.7% -3.8% -4.7% -4.2%
OOH (incl. cinema)  8,064 3.9% 3.1% 1.9% 2.4% 2.5%
TOTAL DIGITAL  106,555 51.5% 16.0% 15.0% 11.8% 11.3%
Mobile  70,263 33.9% 29.8% 28.5% 20.7% 20.4%
Desktop  36,292 17.5% -3.9% -4.5% -5.3% -6.2%
Search  47,665 23.0% 15.8% 14.3% 12.2% 11.1%
Video  13,027 6.3% 24.7% 23.9% 19.4% 19.5%
Social  30,050 14.5% 32.6% 31.4% 21.0% 20.9%
GRAND TOTAL (incl. CE)  207,035 100.0% 6.9% 6.4% 2.3% 2.0%
GRAND TOTAL (excl. CE)  203,169 98.1% 5.2% 4.7% 4.0% 3.6%

Media Owners Advertising Revenue Growth, MAGNA Forecasts

Source: MAGNA US Advertising Revenue Forecast, September 2018

 

 

ABOUT MAGNA

MAGNA is the centralized IPG Mediabrands resource that develops intelligence, investment and innovation strategies for agency teams and clients. We utilize our insights, forecasts and strategic relationships to provide clients with a competitive marketplace advantage.

MAGNA harnesses the aggregate power of all IPG media investments to create leverage in the market, negotiate preferred pricing and secure premium inventory to drive maximum value for our clients. The MAGNA Investment and Innovation teams architect go-to-market investment strategies across all channels including linear television, print, digital and programmatic on behalf of IPG clients. The team focuses on the use of emerging media opportunities, as well as data and technology-enabled solutions to drive optimal client performance and business results.

MAGNA Intelligence has set the industry standard for more than 60 years by predicting the future of media value. The MAGNA Intelligence team produces more than 40 annual reports on audience trends, media spend and market demand as well as ad effectiveness. To access full reports and databases or to learn more about our subscription-based research services, contact forecasting@magnaglobal.com.

 

 

Google, Facebook Lead Digital’s March to Half of U.S. Ad Market

September 20, 2018 // In the News

By Lucas Shaw. Published by BLOOMBERG on September 20, 2018.

With new video services, their next phase of growth targets TV
Politics bolster local, national TV, Magna Global report says
Photographer: Jason Alden/Bloomberg

Online advertising will account for more than half of all U.S. ad sales this year, according to a study, surpassing $100 billion for the first time and marking a milestone in the shift of money, time and attention to the internet from older media.

Having already exceeded the combined ad sales of print, radio and TV, online advertising in the U.S. will increase 16 percent to $106.6 billion, researcher Magna Global said in a report Thursday. Led by Google and Facebook, the growth will boost the overall U.S. advertising market to a record $207 billion this year.

Online U.S. ad sales continue to soar while traditional media struggle

Alphabet Inc., parent of Google and YouTube, and Facebook Inc. account for most online ad sales and show little sign of slowing down. Ad revenue from web searches, dominated by Google, grew by 18 percent in the second quarter, Magna said. Ad sales on social networks, led by Facebook, jumped 36 percent. Amazon.com Inc. has also emerged as a big recipient of ad dollars, with projected revenue of $4.61 billion, according to EMarketer Inc.

Some of this digital growth is coming at the expense of TV, once the dominant medium for advertisers. National TV ads will rise 0.8 percent this year, Magna said, but only thanks to events that don’t occur every year, such as the Olympics and U.S. mid-term elections. Excluding political ads, local TV sales will be down more than 4 percent.

The audience for major TV networks has been declining for many years, as more viewers waited to watch shows on-demand or abandoned conventional TV for streaming options like Netflix and Hulu. TV networks have managed to stave off revenue losses by charging higher prices for their ads, avoiding the painful declines seen in radio and print.

 

Priced Out

But even that strategy is starting to falter. TV ad sales have declined in seven of the last eight quarters and are forecast to retreat for many years ahead.

“An increasing number of brands are being priced out of prime-time or network TV altogether,” said Vincent Letang, an executive vice president at Magna.

Internet companies have positioned themselves to siphon even more ad dollars from TV by investing in video. Google owns the world’s most popular advertising-supported video site in YouTube, and Facebook has rolled out advertising-supported video in several countries.

Sales for advertiser-supported video on the Internet climbed 28 percent in the second quarter and should eclipse both print and radio advertising by next year, Magna predicted.

Read the full article here

Magna: OTT Will Reach $2 Billion In 2018

September 20, 2018 // In the News

by  Published by ADEXCHANGER on

Advertisers are moving over the top.

Over-the-top TV (OTT) ad spend will grow 40% to reach $2 billion this year, according to Magna’s US Ad Spend Forecast Fall 2018, released Thursday. And addressable TV campaigns will reach $800 million in 2018.

The uptick in OTT investment is driven by consumer adoption of smart TVs and set-top boxes; 84 million homes will be reachable by non-traditional TV ad campaigns this year, Magna predicts.

“People are still watching on an old-fashioned TV set, but not necessarily through cable or satellite,” said Vincent Letang, EVP of global market intelligence at Magna and author of the report. He added that 80% of US households will be reachable through connected TVs this year.

Consumer adoption of OTT offers more opportunities for advertisers to run targeted TV campaigns at a much larger scale. It also opens more inventory types for advertisers, like banner ads on the connected TV menu.

Still, OTT spend pales in comparison to the $63 billion national linear TV market. Despite better targeting and measurement, there’s too much fragmentation and not yet enough scale for advertisers to reach a broad audience on OTT.

“It’s complex at the moment, but it’s always like that in a nascent format,” Letang said. “We have no doubt that over time, new metrics and tools will make it easier.”

Despite loyalty from advertisers in the pharma, auto and CPG sectors, national linear TV ad spend will grow just 1% this year, excluding impact from cyclical events like the Winter Olympics and midterm elections. TV continues to command high prices even as ratings erode by 10% to 12%, Letang said.

“National TV is still the way for brands to reach large portions of the population in a short time, to build a brand and launch a new product,” he said. “The efficiency of TV for that marketing is proven and measurable.”

 

Digital dominates

For the first time this year, digital will represent 51% of all ad spend and surpass the $100 billion mark, cementing its dominance over traditional formats.

Overall, digital ad spend will grow 16% this year to $106 billion, Magna predicts. Within digital, mobile will grow 30% to reach $70 billion, surpassing linear TV. By 2023, Magna predicts mobile will make up 80% of digital ad spend.

Meanwhile, desktop ad spend will decrease 3.9% this year.

“Except for work or personal finances, people hardly ever use a computer these days,” Letang said. “When they do, they use ad blockers increasingly.”

Within digital, social media grew by 38%, online video by 27% and search by 18%. Meanwhile, non-digital ad sales will fall by 4.6% this year overall.

Digital, however, isn’t just growing at the expense of linear media, but direct marketing budgets as well. It’s creating marketing opportunities that “simply didn’t exist before,” Letang said.

“[Digital ads] don’t just substitute themselves for advertising mechanisms,” he said. “They create new demand.”

But Magna predicts digital ad spend growth will slow to 12% in the second half of 2018 because that growth is mostly fueled by small advertisers.

“It has to slow down at some point,” he said. “It’s hard to know how much longer increasing spend from small businesses can grow it that much.”

Digital has been a boon to some linear media formats. Out-of-home is expected to grow by 3% this year overall to $7.4 billion, thanks in large part to a 13% growth in digital spend. But digital will drag down overall audio growth by 3.2% this year thanks to Pandora launching a subscription tier, which shrank the amount of inventory in the ecosystem.

Overall, Magna predicts the ad market will grow 6.9% this year to reach $209 billion, its largest growth spurt ever. That’s half a percentage point higher than Magna’s prediction of 6.4% in June, thanks to a strong economic market.

“Half a point is really significant,” Letang said. “It says something about the strength of the first half.”

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OTT AD REVENUE TO HIT OVER $2 BILLION IN 2018, MAGNA SAYS

September 20, 2018 // In the News

By Published by AD AGE on .

As more people cut the traditional TV cord and turn to subscription services like Dish’s Sling TV or Hulu‘s live service, ad revenue for such so-called over-the-top services will reach just over $2 billion in 2018, up 40 percent from 2017, according to new projections out of Magna, a division of Interpublic Group.

At the same time, spending on set-top box addressable advertising, in which commercials target specific households, is expected to total $815 million this year, up 28 percent, as more marketers look to more precisely target consumers and such technological capabilities become increasingly prevalent.

Magna increased its forecast for U.S. ad revenue growth this year to 5.2 percent, a bump up from its June projection of 4.7 percent, citing a stronger-than-expected first half and robust macro-economic forecasts. U.S. ad revenue will reach $207 billion in 2018, according to Magna, surpassing the $200 billion mark for the first time when including special events like the Winter Olympics and the FIFA World Cup.

Digital advertising, which will pass $100 billion and account for half of the total U.S. advertising sales for the first time, is driving much of the growth. Mobile advertising is projected to grow by 30 percent this year to about $70 billion, which is now more than TV and twice as much as desktop. (Ad sales on desktop will decline 3.9 percent in 2018 at the hands of reduced consumer consumption and ad blocking, Magna says.)

“Despite the concerns about brand safety and accountability from many brands and despite the fact that some CPG brands did actually cut down on digital spend in recent months, advertising revenue growth barely slowed down compared to last year,” Vincent Letang, exec VP of global market intelligence at Magna, wrote in the report.

Overall, national TV showed signs of improvement in the first half after declining for six quarters in a row, according to Magna. National TV advertising is expected to grow by just under 1 percent in 2018 to $42.7 billion.

Finance, pharmaceuticals and technology were propelled growth in the first half of the year, with each increasing their ad budgets in the high teens. And retailers grew their ad spending 4 percent from the first half a year earlier. Automotive, movies and restaurants are the only advertising categories to reduce their ad budgets so far this year.

Out-of-home ad revenues are expected to grow by 3 percent to $7.4 billion, a new all-time high. The second quarter of 2018 was the medium’s strongest quarter in four years, boosted by a 15 percent increase in digital out-oh-home inventory and 2 percent increase for traditional inventory.

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