No Big Bump-Up from Olympic, Election Total Spending in 2016 v. 2015

These are some of the more striking conclusions I came to as I looked at our full 2016 review.  

A mile-high view of last year shows that on average, advertising revenue across all media categories grew by 6.8%, which might seem like a decent rate of growth at first blush.  But the figure is about 1% less than the growth percentage for 2015, (7.6%), a year that logically should have been much weaker than 2016. After all, last year we had two huge booster rockets: the Olympics and elections, and 2015 had neither.

Digital was certainly a contributing factor to the results. The sector's ad revenue increased 13.3% last year. That's about half of its average growth in 2014 and 2015: 26.2%.

The online sector is, of course, maturing. There's no getting around that. But a couple of other factors in that space bear watching: Facebook's recent data difficulties and a migration of dollars to TV, which in some instances come at the expense to digital.

Facebook ran into problems last year when it overestimated average video viewing, and other data discrepancies were unearthed as well. While there's no indication that clients are turning their back on Facebook, or that the site's ad rates have been affected, it's fair to say that clients are watching it more closely and its rate of growth may be further challenged.

Facebook's growth rate experienced a decline in 2016. It was 83% last year, and 114% in 2015.  But its market power is obviously still enormous.  When the social media giant and its ad rival Google are excluded from the digital results, the entire sector's rate of growth drops from 13.3% to 8.7%. 

They aren't the only digital players to watch.  For example, advertiser darling Snapchat rocketed up 356% in 2016.

As digital growth has slowed some advertisers are increasing their investment in TV – sometimes at the expense of online. That is a trend I've noted in earlier blog posts. These three examples of rising TV spend were striking in the most recent SMI data: 

  • Target increased its TV spend by 12% last year, after having reduced it by 20% the year before.
  • Paramount's TV expenditures made a very sizable uptick, 24% in 2016, versus a dip of 3.8% in 2015.
  • Progressive Insurance's TV spend lofted 6.2% last year, more than making up for a decline of 5.5% in the year before.

However, TV is facing challenges in other areas.  Backing out ad spend on sports programming shows that the networks' growth was weak: up 1.4% over 2015. Breaking that figure down further: the big four broadcast networks' spend declined 2.4%, and cable networks increased 3.9% for non-sports programming.

Factoring in sports to the overall picture, TV grew 4.4%, with broadcast up 4.6% and cable up 4.0%. Consider that:

  • News popped 14.1%, due in large part to the elections.
  • Sports increased 16%, pumped up by the Olympics.
  • Entertainment lost 1.8%.

It's little wonder that NBC showed the strongest growth among the broadcast networks: up 20%.  It was home to the Olympics and enjoyed an increase in the number of National Football League games.

The only other broadcast network that showed ad revenue gains was CBS, up 3.2%. ABC was off 2.2%, and Fox fell 4.6%.

The big cable general entertainment channels were lackluster last year. TBS was up a mere 1%, while its sister service TNT dipped 1%, and USA declined 2.8.

Politics definitely had its impact on the year, both for advertisers attracted to it, and those that wanted to escape it by investing in lifestyle programming. Consider that:

  • CNN climbed 57.8%.
  • Fox News rose 25.7%.
  • HGTV hiked up 13.8%.
  • Bravo was boosted 14%.
  • Food Network heated up 4.9%.

I have to wonder if the uncertainties of a dramatically different U.S. President will have a spillover effect on the news and lifestyle channels moving forward.  What's more, can digital find ways to increase advertiser demand?  And will more clients decide they've gone overboard with online and return to TV? 

Those are the trends I will certainly be keeping an eye as more SMI data emerges in the months to come.

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James Fennessy

James Fennessy is CEO at Standard Media Index, the leading global provider of real-time advertising spend sourced directly from the booking systems of the world’s largest media buying agencies. SMI delivers the only clear picture of how ad dollars ar... read more