In the US and around the world, the third quarter of 2020 wasn't a nice one for traditional ad revenue. But the digital media are looking up.
According to Magna's latest quarterly advertising forecast, US linear advertising revenue (including linear television, linear radio, print and out-of-home) is projected to decrease 16% to $ 81 billion over the year for 2020. National television advertising sales declined 11% while other linear industries saw even greater losses: radio declined 28%, print declined 30% and out-of-home declined 24%.
However, the resilience of the digital ad market resulted in a much stronger ad market than expected. In the third quarter, digital media advertising revenue rose 10% to $ 140 billion, a much faster recovery than Magna predicted.
Linear television also recovered somewhat in the second half of the year as sports and other tentpole programming events generated a rush of advertising dollars. National television ad sales were only 2% lower in the quarter.
Total U.S. advertising revenue grew 2% in the third quarter, and over the year the total U.S. ad market contracted only 1.3% to $ 221 billion as digital offset skyrocketed double-digit losses in traditional advertising channels.
What was somewhat surprising, however, was the level of resilience of digital media, including social media, search, video, and banners. Magna found that digital formats advertising revenue grew 14% and digital video growth (including long-form, short-form, outstream and OTT advertising) grew 19% in the third quarter.
The outlook for the fourth quarter is optimistic: Magna expects advertising sales to continue to recover with a projected increase in digital media of 14%. National TV advertising sales can fall by as much as 5%, while delays in Covid-19 continue to affect sports programming, the usual advertising medium.
"Overall, it is fair to say that the US market has been more resilient than we expected at the beginning of the crisis," said Vincent Létang, Magnas Evp for global market intelligence, who wrote the report. "And that's partly because of linear media, but mostly because of the unexpectedly strong resilience of digital media and higher-than-expected political spending."
The record spending on political advertising in the second half of the year resulted in additional net sales of $ 6.1 billion in the 2020 election cycle, a huge 60% increase over 2016. This resulted in sales of $ 3.6 billion for local television and local television sales of $ 1.5 billion for digital media, tripling from 2016. (National TV also saw a 32% increase to nearly $ 300 million in political ad spend.)
Overall, political advertising expenditure accounted for two percentage points of the additional market growth.
That helped the local television in particular. On an annualized basis, Magna projected that local television would have decreased 3% but would have decreased 20% without political spending. However, the coming year could be tougher for local television. Categories like the auto industry, which spends a lot of money on the medium, can have significantly less budget given the grim economic and employment outlook.
In 2021, Magna projects linear ad sales to stabilize and grow by 3.5%, while digital ads are expected to accelerate by more than 10%. Globally, ad spend is expected to grow 7.6% to $ 612 billion. In the US, the advertising market is expected to grow by 4% – assuming the Covid-19 vaccinations run as expected and major cyclical events like the Olympics take place as planned.
Assuming this is the case, national television advertising revenue is expected to grow by 5%, driven by the expected additional $ 800 million ad sales at the Tokyo Summer Olympics. Digital ad revenue is expected to continue growing 8% and video advertising revenue is expected to grow 12%.