Wall St. Speaks Out on 4Q Ad Trends - Pivotal Research Group

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4Q Ad Trends: Were They So Bad? Now that the vast majority of public US-based media owners have reported their fourth quarter earnings, we can make a preliminary read on 4Q advertising trends. A more comprehensive assessment of the year will await results from trade groups whose data we rely on for some of our underlying estimates.

Here's what we think we know so far:

Internet-related advertising likely accelerated in 4Q14 vs. 3Q14, with what we think was probably around 19% year-over-year growth in the quarter, up from more like 17% growth in the third quarter. For the full year, total digital advertising rose by 16% on these estimates. For the year, industry-level growth was relatively broad, with very similar growth whether or not we include the two dominant players, Google and Facebook. However, we expect that in the long-run both take share from most of the others. As we've previously noted, web endemics drove much of the growth yet again, with likely more than 25% year over year growth during the quarter from the likes of Google, Amazon, EBay, Expedia, IAC and others.

Meanwhile, national TV advertising looked worse in the fourth quarter than it did in the third, but not by much, and not far from where we thought it would play out when we made our last round of estimates in December. At the time, buyers we were in touch with suggested the market for national TV could be down by as much as 5%, but instead it appears that national TV (primarily broadcast network and national cable advertising) declined by only 1% year-over-year in 4Q14, compared with essentially flat year-over-year trends in 3Q14. Our forecast was for closer to -2%. For the full year, national TV grew by around 5%, or by more like 2% if we exclude incremental revenues associated with the Olympics. Such a growth rate isn't all that bad if we consider that total advertising is growing around this level on an annual basis.

As for other media, radio and outdoor advertising looked essentially flat for the quarter and year, while national print declined by high single digits (our composite of magazine publishers based on data from Meredith and Time Inc. showed like for like declines of 9% for the quarter and 8% for the year). Interestingly, the one stand-out "traditional" media was direct mail, as the US Postal Service grew its revenues from standard mail – the primary form used by advertisers – rose by 8% on the quarter and 5% on the year. Although most of these gains can be ascribed to political advertising (more than half of the growth in the fourth quarter) and pricing gains (most of the other half) the fact that a traditional dead-tree medium continues to grow in any form reflects the growing role for data-driven marketing and the growing presence of data-driven marketers across the advertising economy.

REPORT INCLUDING DISCLOSURES CAN BE FOUND HERE: Madison and Wall 2-27-15.pdf

Brian Wieser is a Senior Analyst at Pivotal Research Group, where he covers securities which are impacted by the advertising economy, including Facebook, Google, Yahoo, Interpublic, Omnicom, WPP, Publicis, Nielsen, CBS, Viacom and Discovery Communications. Brian can be reached atBrian Wieserbrian@pvtl.com.

 

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