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Ad Forecasts Predict Mixed Year For Publishers 12/04/2018
by Rob Williams , December 4, 2018 Madison Avenue forecasts ad spending will grow modestly next year. Publishers will be challenged to boost digital ad sales amid growing competition from social media companies like Facebook and Snapchat. The Big Three media agencies — WPP’s GroupM, IPG Mediabrands’ Magna and Publicis’ Zenith — this week cut their estimates of 2019 ad spending. An average of their estimates shows the growth rate in ad spending will slow from 5.3% this year to 4.1% in 2019.
Among the risks to the outlook are rising interest rates that make buying a home or a car more difficult for many people. A possible trade war between the United States and China that triggers a jump in consumer prices also may hamper commercial activity.
Publishers can expect to see a 17% drop in print advertising to about $15 billion in the United States, followed by a 18% drop in 2019, according to Magna’s estimate.
The saving grace for many publishers will be mobile ad sales, which are forecast to rise 31% to $70.7 billion this year, followed by a 21% gain in 2019. As viewers shift their viewing habits to mobile devices, publishers need to ensure their mobile websites are optimized for smartphone viewing and their apps are easy to read.
Publishers also will have to boost their online subscription revenue, as newspapers like The New York Times have done in the past few years. It’s a major reason the company’s stock has risen 45% this year, after a 39% gain in 2017, outpacing the broader market by a long stretch.
The threat from Amazon and other online retailers that start selling ad space next to product listings may not be as bad as some predict, according to Zenith.
Ecommerce sites like Alibaba led the way in selling ad space in China. Amazon is catching on to that revenue model. It now has the third-biggest digital ad business in the United States.
If ecommerce ad spending grows as rapidly as it did in China during the past 10 years, it will make up 18% of the total ad market by 2027, Zenith estimates.
But the money spent on ecommerce ads won’t necessarily cannibalize other marketing budgets. Brands’ commercial teams typically have budgets to spend on retailers that are separate from marketing, per Zenith.
More likely, publishers will seek stronger partnerships with ecommerce sites to drive direct transactions and affiliate revenue to support their efforts to create original content.