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Real talk with magna global: the media economy report
June 21, 2019 // Thought Leadership
Brian Hughes (EVP, Audience Intelligence & Strategy) is joined by summer residents Alice Bell-Black (Intelligence) and Makeyba Mowlah (Marketing Operations) to discuss the 15th Media Economy Report.
GLOBAL AD SALES GROWTH CONTINUES TO COOL IN 2019, MAGNA SAYS
June 17, 2019 // In the News
ByPublished by ADAGE on 16 June 2019.
Digital ads now account for more than half the worldwide market
“Coming after many quarters where the pace of growth was very consistent, it has slowed down quite noticeably,” says Vincent Letang, EVP, global market intelligence at Magna. “It can’t continue to grow by 20 percent like it did in the last few years forever.”
Early this year, digital ad sales reached a milestone, hitting 51 percent of total ad sales in the world. That saturation is contributing to a weaker forecast for 2019.
In addition, there is a lack of cyclical, marquee events for advertisers to pour funds into. “There are no elections, no Olympics, no FIFA World Cup,” Letang says. While the FIFA Women’s World Cup and the South American Copa América soccer tournament are currently underway, they are “nowhere as powerful at moving audiences and TV spend,” he adds.
But even when forecasters strip out cyclical effects entirely, Letang says, the overall trend for ad sales growth is down. For now, that effect is mitigated by higher-than-expected spending in the U.S. and China. “The surprise is the resilience of the U.S market. The first quarter was very strong, in line with 2018,” Letang says. Though reach and audience have been falling, prices are up 10 percent.
Non-Linear Sales a Growing Part of TV Revenue: Magna
June 17, 2019 // In the News
By JON LAFAYETTE. Published by BROADCASTING & CABLE on 17 June 2019.
Full-episode players and Hulu will capture $2.6B in 2020
While forecasting a decline in linear TV, media buyer Magna said that U.S. non-linear advertising sales by television companies will increase 22% to $2.6 billion in 2020.
Non-linear advertising–including network full-episode players and Hulu–will represent 6% of national TV ad revenue, Magna said, reflecting the continued demand for TV, even as the number of traditional ratings points dwindle.
“Linear television remains attractive for its reach and brand safety, and affordable by the tech sector,” the Magna report said.
That demand is pushing TV commercial prices on a cost-per-thousand viewers basis up more than 10% a year to more than $50 for adults 18-49 in prime time.
English-language broadcast network ad revenue is expected to be up 1% in 2020 thanks to a boost from the Olympics and presidential election. Without the Olympics and elections, spending would be down 4%.
Cable networks are looking at a 0.5% drop in 2020 including the Olympics and election spending or 2% excluding those events.
Magna said that digital advertising sales growth slowed in the first quarter of 2019 to 16%. The agency expects digital ad spending to finish 2019 up 13% and grow just 10% in 2020.
The technology sector has been the most dynamic ad spenders because of Intense competition between new internet giants and big old tech brands over smart home products, over-the-top video-on-demand services and cloud services, Magna said. The launch of 5G will re-ignite marketing in an otherwise mature wireless sector, the agency said.
Direct-to-consumer brands will increase traditional media spending by more than 40%, from a relatively low base, according to the report. “Those brands are particularly attractive to television vendors as they come to the TV market with little leverage and are willing to pay higher rates than CPG brands that have been on TV for fifty years and have the scale to negotiate sub-market cost inflation,” Magna said.
Overall, Magna forecasts that net advertising sales in the U.S. will be up 5.1% in 2019 excluding special events. For 2020, ad sales are expected to grow 5.8% to $233 billion, with the Summer Olympics and presidential election generated $6.2 billion in incremental revenue, up from the $5.4 billion in incremental revenue added by Olympics and elections in 2018.
Globally, Magna has raised its forecast, now calling for 5% growth to nearly $600 billion in 2019, from a December estimate of 4.7%. Either way, it’s a 10th straight year of growth.
For 2020, the agency sees total growth of 5.4%.
“Global ad spend continues to grow as the economy remains strong in key markets but two factors are slowing down the growth rates in 2019: one is cyclical (the lack of major events in 2019, following a record year in 2018) while the other is structural: digital ad formats maturing (from % in 2018 to % this year) as they now account for more than half of total advertising sales,” said Vincent Letang, executive VP, global market intelligence at Magna. “However product innovation (smart homes, cloud services, OTT, 5G) and marketing innovation (direct-to-consumer brands) will continue to drive ad spend growth this year and next.
Worldwide traditional linear advertising sales–including broadcast TV and radio, newspaper and magazine ad pages and out of home–will decrease by 3% to $290 million in 2019 while digital ad sales will grow by 14%.
Linear TV ad revenue will decrease 2% to $175 billion in a non-Olympic year. Excluding the U.S., linear TV ad revenue will be up 1% in 2019.
Digital ad sales this year will represent more than half of global ad sales for the first time this year, reaching $304 billion, or 51% of the total.
The bulk of digital advertising growth will come from ad impressions and clicks on mobile devices (mostly smartphones). Mobile ad sales grew by 24% in 2019, to account for 68% of total digital advertising while desktop-based ad revenue will shrink 3%, due to declining usage and ad blocking
Digital Advertising Growth Will Slow This Year, Magna Report Predicts
June 17, 2019 // In the News
By KELSEY SUTTON. Published by ADWEEK on 17 June 2019.
TV ad spend remains ‘resilient’ as other traditional platforms see more dramatic losses
As digital media penetration reaches near-universal status, digital advertising revenues around the world, including in the U.S., are anticipated to slow by several percentage points compared to years past, according to Magna Global’s newest advertising forecast.
The report from IPG Mediabrands’ intelligence arm, which forecasts advertising spend and trends across different platforms and sectors, predicted that digital ad revenues will grow by 14% this year to reach $304 billion. That’s a marked slowdown from the 18-20% annual growth observed in the four consecutive years prior. The bulk of that spend is expected to come from ad impressions, as well as clicks from smartphones and other mobile devices.
In the U.S., total advertising sales are expected to reach an all-time high of $220 billion, a 3% increase from last year, and digital ad sales are expected to make up about 57% of that number, or about $126 billion. The growth of ad spend on digital ad formats also slowed in the U.S., increasing 16% year-over-year instead of the consistent six quarters of between 19% and 22% growth.
Vincent Létang, evp of global market intelligence at Magna and the author of the report, said a deceleration in digital media consumption rates, due to near-universal penetration rates, was also reason for the slowed growth.
“I think we’ve reached a tipping point with the sheer scale of digital advertising,” Létang said, adding that the slowdown, which Magna and other firms have been anticipating for years, appeared to happen rather suddenly. “Overall, we consider that the slowdown we were predicting is happening. Nothing can grow for 20% forever.”
That’s not to say digital media isn’t still expanding at rates that other platforms would envy; it’s still expected to grow in double digits in most countries, Létang said, as ad spend on other platforms declines.
However, even as linear ad platforms—including TV, radio and traditional publishers—see consistent shrinkage year-over-year, Létang said linear television continues to prove “resilient” while other traditional ad platforms see more dramatic losses. Linear television ad revenues around the world are expected to decrease by 2% around the world to $175 billion, and by 3% in the U.S. to $41 billion, which Létang said is partially due to a lack of major cyclical events that prompt short-term surges in TV spend. (In the U.S., that anticipated decline is also attributable to a decline in TV spend from some previously reliable spenders, like automotive brands and movie studios.)
Outside the U.S., linear TV ad revenues are expected to increase slightly— about 1%—in 2019, which Létang said will be because of strong demand from traditional verticals like pharma or CPG brands that choose TV for its brand-safety reputation, as well as bigger TV ad investments from major direct-to-consumer brands and the tech sector that are graduating from digital-only marketing campaigns into broader TV buys.
“The demand for traditional TV is still strong, and because the supply is shrinking—pretty much everywhere now linear television views are falling—declining supply and stable demand mechanically produces inflation,” Létang said.
There are other reasons why linear ad spend is seeing tempered losses, including the continued advertiser interest in OTT. Ad spend on ad-supported video-on-demand platforms ranging from platforms like Hulu to broadcasters’ own full-episode players is expected to stabilize television broadcasters’ total advertising revenues around the world. That spend on those AVOD platforms, though, is expected to account for only 5% of total global television revenues in 2019.
A similar dynamic can be seen with linear radio ad revenues, which are decreasing steadily but which are being offset partially from advertising spend on digital audio advertising platforms like Spotify and Pandora. Podcast advertising revenues, which made up up about 15% of all digital audio advertising in 2018, are expected to grow by nearly 30% this year, another growing sector that Létang said will help stabilize audio advertising.
In 2020, Magna predicted that overall advertising growth will re-accelerate, because of major media events like the Summer Olympics and the presidential election cycle. The intelligence firm predicts advertising growth will increase 5.8% to $233 billion, and said the anticipated $6.2 billion in incremental advertising revenue will help mitigate an anticipated economic slowdown.