Wall St. Speaks Out on Improved Ad Industry Growth Prospects

Raising A Glass of Rosamp233 to Ad Industry Growth Forecast Brian WeiserREPORT INCLUDING DISCLOSURES CAN BE FOUND HERE Madison and Wall 61314pdfEditor39s Note MyersBizNet forecast for abovetheline 2014 advertising growth including digital media is 74Ahead of the advertising industry39s biggest annual event the Cannes Lions which are held next week we find ourselves more optimistic about the industry And it39s not just because we expect to hear much positivity emanating from the leading lights of creative media and dare we say ad tech excellence in the days ahead Instead it is because with yesterday39s release of the IAB39s first quarter estimates for online ad spending we have been able to add a key input into our US industry model Combining all of the data now at our disposal we have reassessed our expectations for the year ahead Much like the French Riviera it39s downright sunnyThe first quarter of 2014 initially appeared disappointing given what appeared to be a tepid rate of growth for many industry subsectors especially for higher profile media owners with national cable networks Blame was duly apportioned to bad weather the Olympics or both in combination However on our current estimation most media posted some acceleration or less deceleration vs the fourth quarter of 2013 Collectively we estimate the industry grew on a normalized basis excluding incremental Olympic spending on national TV and political spending on local TV by 44 during 1Q14 vs 34 in 4Q13 While many traditional media continued to decline local and national television continued to hold up with low to midsingle digit growth and online advertising accelerated to a 19 year over year gain By itself digital advertising39s gains of 18 billion almost matched the entire industry39s 19 billion of growth during the quarter We could alternately suggest that television advertising39s 16bn year over year gain excluding the Olympics and Political advertising was equally critical in driving the industry39s growth as most other traditional media tends to serve as the source of budget shifts into digital advertisingEqually notable it appears we are observing more than just a shift of spending There is a heightened volume of money in the advertising economy largely from the web endemics including ecommerce based marketers app developers and digital content distributors who tend to concentrate their budgets within digital media We39ve previously noted that web endemic companies account for a large share of online advertising and their growth in ad spending has generally grown at a pace that exceeds online ad revenue suggesting that these companies are accounting for a growing share of digital advertising If the web endemics accounted for a third of digital advertising but grew their budgets by 25 we could estimate that this group of marketers is driving half of webbased advertising39s gains Put differently we could say that that half of the growth in all advertising spending is equal to the growth in spending by these marketers aloneThe presence of new money may be evident from our statistical analysis of the advertising economy Historically we have found the best fit between economic variables and advertising involves a formula that regresses Personal Consumption Expenditure growth and Industrial Production Growth against normalized exPolitical and incremental Olympic advertising growth During 2013 our model would have predicted 05 growth but instead we saw around 32 growth While variations are to be expected this seems like a fairly significant gap And now for 2014 using the Survey of Professional Forecasters39 consensus estimates of economists39 expectations around PCE and IP for this year our model would predict 32 growth But this level of growth would imply less than 30 growth in each of the year39s remaining quarters which would represent a slower pace of growth than any of the past four an unlikely occurrence given the improving nature of the overall economy Consequently it seems appropriate to raise our expectations for the year for now to 40 on an annual basis This compares with our most recently published forecast for 2014 for 25 normalized industry growth We have now made the same 40 forecast for next year to reflect what should be continuing abovenormal trends Perhaps we could consider raising our estimates higher but we are mindful that there is some risk of spending on app installations tapering as time progresses Ecommerce app installs and digital content distributors probably won39t get much focus at the Lions this year although digital advertising in a broader context will certainly be a central element of the Festival along with the traditional focus on television commercials And why not These media provide the lifeblood of much of the industry presently and drive much of the industry39s growth at the present time But so long as the industry continues to grow one way or another the industry can celebrate and the rosamp233 can continue to flowBrian 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 at brianpvtlcom amp160Read all Brian39s MediaBizBloggers commentaries at Brian Wieser39s Pivotal ReportCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

Become a Thought Leader.
Share your thought leadership article with industry professionals & have them archived in Thought Leadership

Wall St. Speaks Out on Improved Ad Industry Growth Prospects

Author

Publish date

Channel

Brian Wieser

"About That with Carl Mayer:" Alaina Donnellon (Episode 10: Political Spending) - By Carl Mayer

More Videos:

Become a Thought Leader. Share your thought leadership article with industry professionals & have them archived in Thought Leadership

Wall St. Speaks Out on Improved Ad Industry Growth Prospects

Enjoying This Commentary? There's More to Love

Brian Wieser

"About That with Carl Mayer:" Alaina Donnellon (Episode 10: Political Spending) - By Carl Mayer

The payment was successful

Cookies

Become a Thought Leader.
Share your thought leadership article with industry professionals & have them archived in Thought Leadership