Borrell: Another Wacky Year For Ad Spending In 2021.

Local businesses will increase their ad spending yet again in 2022, by 6.4%, to $138.9 billion. Digital will see the lion’s share of the growth, up 9.1% in 2022, while non digital forms of advertising, such as outdoor, print and radio, will tick up 1.3%. The new numbers are from Borrell’s new market-level local advertising forecast, revealed Tuesday during a webinar.

One of the top takeaways from the outlook is the unevenness in ad spending across individual media, local markets and ad categories. “We know 2020 was a wacky year, well guess what? So is 2021,” said Corey Elliott, Borrell’s Executive VP of Market Intelligence.

Pick any given media and you’ll find a different story in the numbers. “Some are going straight up, some are kind of in the middle, some are bouncing up and down,” Elliott said. Radio, he added, is “riding the waves.”

The new local forecast shows radio recovered nicely in 2021 with a 23.7% rebound over 2020. However radio is among five media forecast to see declines in 2022, with Borrell predicting a 4.6% dip.

Newspapers, on the other hand, lost revenue across the three-year period and streaming video is on a consistent rocket ride up. “So any given media had a different story between these two years 2019 to 2021,” Elliott explained. “Not only that, geography played an important role.”

Categories, too, continue to bob up and down. Even hardware stores, which benefited greatly from the pandemic, had some highs and low in 2021.

Similarly, the percentage of local merchants who say it’s harder to sustain a business has seesawed. During the COVID-induced recession of 2020, the percentage that said it was tougher consistently tracked in the 80% range. Then optimism crept in. By February 2021, with millions of Americans rolling up their sleeve for a vaccine, the number of businesses that said it was harder to keep the doors open declined to 56%. It got even better in May, falling to 48%. But by August it increased to 57% of businesses polled by Borrell agreeing it’s been harder to sustain a small business during the past six months.

Along the same lines, there has been a bit of a rollercoaster among local businesses about whether the overall economy is getting better or worse in 2021. A surge in optimism earlier this year was followed by a recent tapping on the brakes. By August, 40% of local businesses surveyed said economic conditions will get worse in the next six months. That’s more than double the number who felt that way in February and May of this year.

And that in turn, is influencing what local businesses will spend on radio and other media. One in five (19%) surveyed in August said they will spend less over the next six months on advertising than they did in the previous six months. That’s up from 15% in February and 11% in May. However, more businesses surveyed in August said they will spend more (25%) than less and more than half (52%) intend to spend the same, although both percentages are lower than they were in May.

Given the topsy-turvy 2020-2021 period, CEO Gordon Borrell singled out 2019 as a critically important year. “As you're budgeting for next year, you look at 2019, not 2021,” he advised webinar attendees. “You need to talk with your managers about that. Because if you're growing, and if you're planning for incremental change over 2021, you may be screwed.”

To underscore the importance of comparing 2019 to 2022, Elliott walked attendees through a series of local markets, showing how gains made from 2020 to 2021 can be offset when looking more broadly at a three-year trend.

In other findings, the new Borrell forecast shows the pandemic accelerated the growth of digital ad spending. Flash back to 2017 and 50% of ad dollars went to some kind of digital format. By 2019 that reached 57% before jumping six percentage points to 63% in 2020. Now it’s on track to hit 67% by 2022 before climbing to 72% in 2025.

No media will benefit more from this trajectory that streaming video. “This is dramatic. Spending on streaming video advertising will surpass search, we believe in 2025,” Borrell said. “Imagine that – streaming video as the number one of all 17 different types of advertising that we count.”

Borrell’s data is different from some other forecasters because it is derived from expenditures by local businesses, not revenue from media companies. Its forecast also takes into account local employment data, retail sales, SEC reports and other financial documents, COVID hospitalizations and deaths and an ongoing survey of local businesses.