Online ad spending will surpass national TV in 2015, according to Standard and Poor’s.
We expect core ad spending to grow at or slightly less than the rate of GDP, in a convergence of several trends. Print-based advertising is likely to continue to contract while online ad revenue continues to grow at a pace well ahead of GDP.
We think that in 2015, total online including search will surpass national TV (including broadcast networks, national spot, syndication, and cable networks).
Proliferation of online ad inventory–in particular discount “remnant” inventory sold on ad networks–hampers pricing across all online advertising–even prime inventory. It constrains pricing in TV, and it has a deflationary effect on print. We think that the larger online gets, the greater the pricing drag may be on total ad spending growth. Certainly, low-cost, highly measurable advertising brings efficiencies to small and large marketers. But in aggregate, we think these trends are likely to preclude a return to total ad spending growth in the solid mid-single-digit percent range (or higher) that we witnessed in the 1980s and 1990s.
Although Standard & Poor’s believes economic growth will gain a more solid footing in 2013, ad spending–historically highly correlated with the economy–is only showing scattered signs of improvement thus far. Our economic forecast assumes that key economic data begin to improve from the March trend. In the meantime, we believe the strongest growth will be in Internet display advertising, Internet search, and cable networks. Key factors that could affect media and entertainment companies include:
- An economic recovery that could pick up in 2013, despite still-high unemployment;
- Investor and marketer worries over European and U.S. budget deficits, and the continuing U.S. debt ceiling drama;
- Dependence of ad spending on stable GDP growth and consumer spending;
- Vulnerability of non-advertising-driven subsectors to any adverse shift in consumer spending; and
- Severe leveraging in several subsectors, which many companies may be unable to withstand.
For details by media sector, see the full Industry Report Card