“Audio saw an acceleration in the third quarter.” That is the assessment of MoffettNathanson in its latest update on the advertising market. The Wall Street firm says audio advertising returned to growth during the quarter, with total ad spending rising 1.2% vs. a year earlier. According to its Ad Tracker, total U.S. advertising, including Olympics and political, grew 16.3% during the third quarter, the fastest growth rate since early 2022.
“Thanks to the outsized contribution of those factors to traditional media platforms, third quarter was also the rare quarter in which traditional media growth outpaced the rest of the market,” the report says. MoffettNathanson says traditional media ad spending jumped 19.3% vs. the prior year, while online advertising growth decelerated slightly to 15.6%, down from 17.1% during the second quarter.
“Third quarter 2024 was a standout moment in the U.S. advertising landscape, with the industry delivering impressive growth of +16%. One would need to look back eight years to 2016 to find a comparable performance.” MoffettNathanson says. “It is a quarter worth celebrating, but we unfortunately find ourselves questioning how long this party may last. If we dig into the details of the quarter, we may find that the good news runs only skin-deep.”
That is because of $1.4 billion of estimated ad revenue tied to the Summer Olympics. When that was stripped out, the ad market grew 14%. Removing political ad spending of $2.2 billion during Q3 further reduces the growth rate to 11%. “Yet, all of this is to say that 3Q was still pretty good quarter, just not quite the blockbuster the topline numbers may imply,” analysts say.
The firm also notes the growth rate adjustments include a reallocation it has made moving digital audio ad spending away from “online” advertising and into the “audio” spending category, which it previously labeled as “radio.”
MoffettNathanson is leaving its growth projection for the overall ad market at 11.1% for all of 2024, with audio revenue forecast to total $16.2 billion, down 1% from $16.4 billion in 2023. The firm predicts audio ad spending will see similar trends in 2025 with a projected $16.1 billion in total revenue next year, while overall ad spending growth is predicted to slow to 8.8% without the boost of political ads and an Olympics.
“We continue to expect strong growth from the digital channels, more than offsetting contractions in traditional media,” it says.
The MoffettNathanson AdTracker says food and beverage ad spending has been among the best-growth categories this year, with total spending up 16% year-to-year. Personal care is close behind, with a 14% increase and a solid 8% growth rate for the pharmaceutical category. AdTracker also reports growth for restaurants (+7%), telecom (+6%), automotive (+4%), retail (+3%), and travel (+2%). Weaker categories include technology, which is down 7% from a year ago, and the media and entertainment category, which is off 9%.
“Heading into 2025 also means heading into a new political administration that may pose further risks to future growth,” the firm says. It points to the potential that new regulations are placed on pharmaceutical advertising, which MoffettNathanson accounts for a “substantial and growingsegment” of the overall U.S. advertising market. It points to data suggesting that pharmaceutical ads contribute 6% to 8% of total U.S. advertising.
“The risks would disproportionately affect linear television,” the firm says, but adds, “Its impact would be felt, though on a smaller scale, elsewhere throughout the ad market.”
MoffettNathanson also says that higher tariffs proposed by President-elect Trump could also have far-reaching implications that will be felt across the entirety of the ad market, especially in the automotive and technology sectors.
“While it is unlikely that even pharma advertising would go to zero under any scenario, moves that impair these industries’ ability to advertise or their financial health more broadly may have significant adverse impacts across advertising,” it says.
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