Forecast Calls for Short-Term Ad Slowdown

Spending Should Slow In Second Half Before Revving Up In 2015
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The advertising market is expected to continue to slow in the second half but should return to record growth levels next year, driven mainly by gains in cable television and online media, according to media forecasting agency Magna Global.

After a sluggish second quarter — overall ad sales were up about 2.3%, including political and Olympics ad campaigns — Magna estimated that total advertising revenue would rise by 5.1% in 2014, down almost a full percentage point from the 6% growth the agency previously expected.

But that sluggishness is expected to be short-lived. Magna predicted the ad market would rebound in 2015, growing by 3.3% to reach $172 billion, its highest level in 10 years. And fueling that rebound would be increases at cable television networks and digital media.

After a strong first quarter — in which overall ad revenue rose 6.1%, boosted mainly by the Winter Olympics — the second quarter was relatively flat. Overall ad revenue rose 2.3% (including political and Olympics campaigns), or 2% excluding P&O.

SWIMMING UPSTREAM IN Q1

That was at odds with the overall economic climate, according to Magna Global. The first quarter was hit by a mini-recession, with GDP down by 2%. GDP rose 4% in the second quarter, indicating a recovery.

While softness in the second quarter prompted the revision, Magna believes it was mostly circumstantial — the Winter Olympics helped pull in Q1 budgets at the expense of Q2 — and partly structural, due to the acceleration of ad dollars shifting towards cable, Spanish- language networks and online video. But the agency also said it believes that the slowdown is temporary — a strong third and fourth quarter are expected, just not enough to counter the sluggishness of the second quarter.

For the year and excluding P&O, total ad revenue is expected to reach $167 billion, a 3.5% increase and below previous forecasts of 3.9% growth.

Driving those increases will be cable networks — up 2.8% in the second quarter and 3.5% year to date — Spanish-speaking broadcast networks, up 43% in Q2 (29% year to date) and online video, up 15% in the most recent period. Magna said it expects broadcast and cable Spanishlanguage networks to build on the momentum gained during the FIFA World Cup in June and July. Magna estimated that Spanish-language broadcaster Univision alone generated about $100 million in incremental ad revenue from the World Cup.

WORLD CUP A WIN

“Compared to the previous World Cup four years ago, ratings grew significantly in almost every demographic on Spanish-speaking Univision, and they grew even more on English-speaking ESPN (between 50% and 70% across targets), suggesting that soccer is becoming increasingly popular among non-Hispanics too,” Magna said in its report.

While cable networks are expected to grow in the second half of the year — especially as the scatter market is expected to make up for a sluggish upfront — overall television- segment revenue is expected to rise about 2.2% for the year (excluding P&O), dragged down by declines in broadcast TV. Magna estimated that ad revenue at broadcasters will decline by 0.5% in 2014.

Digital ad sales, up 17% in 2013, are expected to be slightly better in 2014 — up by 17.4% and reaching $50 billion. But the sector is expected to catch fire in the next two years.

Magna predicted that digital ad spending will rise by 15.7% in 2015 — up from its previous forecast of 12.8% growth — as more ads shift from broadcast to online. Driving the digital segment will be mobile, up 64% in 2014 and by another 51% in 2015.

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