Ad Spend Is In Flux As Advertisers Reshuffle Budgets For Digital

mhIs traditional advertising dying in the US? Not for midsize advertisers, according to research from Kantar Media.

However, while smaller and midsize advertisers are spending more on “traditional linear media,” the largest US advertisers are redirecting those budgets to digital forums.

“The growth of the ad market is on two different tracks right now,” said Jon Swallen, chief research officer for Kantar Media North America.

Overall, advertisers increased spending in 2014 by 0.7% to total $141.2 billion at years’ end, but during 2014’s fourth quarter, total ad spend dipped 1.6% year-over-year.

Retail spent the most in 2014 at $15.8 million. The automotive sector took second place with $14.2 billion, followed by services at $9.6 billion.

According to Kantar’s findings, online display grew, but just barely. Compared to 2014, digital display grew 0.9%, excluding video and mobile ad formats.

Display is the most mature segment of the digital marketplace, explained Swallen, “Some of the money that’s coming out of display advertising is probably being redirected into other digital channels,” he said. “It’s a reflection of the relative maturity of digital display as compared to other digital outlets.”

The top 10 advertisers spent $15.3 billion in 2014, a 4.2% year-over-year decrease. The biggest ad spender in 2014 was Procter & Gamble, who shelled out $2.6 billion. But that figure is a down 14.4% compared to P&G’s 2013 ad spend.

General Motors was the second-largest advertiser in 2014 at $1.6 billion (down 8.2% YoY), followed by AT&T at $1.6 billion (down 12.7% YoY).

Berkshire Hathaway and Pfizer were the only financial services and pharmaceutical companies in the top 10 ad spenders, which came as no shock to Swallen, who explained that pharmaceutical advertising is heavily dependent on new drug launches, and several big drugs came to market last year. And investment spending has generally been strong as the stock market has gone up.

While the top 10 advertisers account for about one-tenth of all spending, they are rarely a bellwether of broader trends, according to Kantar’s research.

The midsize advertising group continues to be the fastest-growing segment, with a 4.6% increase in ad spend.

Screen Shot 2015-03-20 at 10.48.04 AMBut are these fluctuations anomalous, or are they indicative of an industry-wide trend? Swallen was hard-pressed to answer that question. One explanation for the advertising slowdown could be that the GDP and consumer spending are in a low-growth mode, he said, and advertising spend tends to follow.

Another interpretation is that big marketers, including P&G, are looking to do more with less – more targeted ads, but fewer ads overall.

“That’s consistent with moving budgets to digital media,” Swallen said. “There are many digital media channels that offer more capabilities in that area, as compared to linear media.”

“Large advertisers have quite a bit of internal information from analytic work and modeling work they do to understand which pieces of their marketing budgets are working and which pieces aren’t,” he added. “Based on those analytics, they have an idea of how to go about reconfiguring their spend and moving money into more product areas.”

Notably, Kantar’s study omits mobile ad spend.

“We are tracking mobile advertising, but we don’t have reliable spend estimates yet,” Swallen said. “All indications are that within digital, mobile is the most rapidly growing piece, off a smaller base perhaps, as compared to display or video. It’s still significant and growing at a fast clip.”

BI Intelligence estimates that mobile ad spend in the US will hit $42 billion in 2018. As the largest advertiser in the US, mobile ad spend for a firm like P&G is likely growing, which could indicate that P&G’s ad spend hasn’t shrunk as much as this report indicates. Regardless, the brand is undoubtedly exploring a new ad budget breakdown this year.

Last year it came to light that P&G intended to spend 70% of its 2015 ad budget on programmatic. P&G CMO Marc Pritchard said the brand is a big fan of automation.

“It creates more value,” Pritchard said in a recent interview with AdExchanger. “It creates value for the consumers, and therefore creates value for the publisher and for the advertisers/brands. It enables you to more precisely target, and do it at a very valuable price, and then get a nice business lift from it.”

Moving forward, Swallen said the advertising industry can expect more of the same. “We’ve seen this pattern for several quarters and have no reason to expect it’s immediately going to change,” he said. “I’d expect the same in 2015.”

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