The U.S. was among the world’s most resilient ad markets during the COVID-fueled recession of 2020 with total media owner’s ad revenues dipping just 1% to $221 billion. That’s less than one third of the 4.2% drop registered globally. But the latest forecast from Magna reads like a tale of two cities with digital ad formats performing better than expected, with 10% growth to $140 billion in 2020, while traditional or linear formats tumbled 16% to $81 billion.
To no one’s surprise, political spending softened the pandemic blow. Magna estimates campaigns and PACs shelled out $6.1 billion during the 2020 election cycle. Without it, total U.S. advertising would have declined by a steeper 3% versus 2019 and traditional media would have been closer to -19%.
Apart from national television, linear media formats “have still not rebounded and continue to suffer in the second half,” says Magna, which is part of agency holding giant IPG Mediabrands. For full year 2020, its analysts believes that national television ad sales shrank by -11%, local television by -3% (-20% excluding political spending), out-of-home by -24%, radio by -28%, print by -30% and cinema by -80%.
Two trends converged to propel digital media to double-digit growth. The first was the sudden acceleration of the long-term shift in retail purchases from brick & mortar shopping to e-commerce. Combined with the classic shift towards so-called lower-funnel marketing channels in recession times, this fueled an 8% boost in search advertising and an 18% surge in social media investment. The other major contributing factor was a quickening of digital video consumption, as both streaming video on demand (SVOD) and ad-funded video platforms benefitted from consumers spending more time at home, boosting total digital video growth by 19%.
“It turns out digital media resilience was even stronger than expected,” says Vincent Létang, Executive VP, Global Market Intelligence at Magna and author of the report. “The pandemic triggered a tremendous acceleration in both supply (digital media usage and audiences, ecommerce) and demand: small businesses embracing digital media to keep their business alive during lockdowns, big brands pivoting towards lower-funnel marketing channels as they typically do in recession times.”
Echoing what numerous radio executives have described in their third quarter earnings calls, spending bounced back in Q3 as many businesses reopened their doors. Combined with the return of sports, total U.S. ad sales grew 2% vs Q3 2019. The Magna forecast calls for the ad recovery to continue in the fourth quarter with a 6% spurt (including political spending) or +2% (excluding political). Digital media ad spend is poised to grow by 14% in Q4.
Political Tally Exceeds $6 Billion
So how big was political spending in 2020? Magna puts the total intake at a record-smashing $6.1 billion, 60% higher than the last presidential election year of 2016. That mitigated the overall ad spending decrease by two percentage points from -3% for non-political advertising sales to just -1% overall. “Record fund-raising and a great number of competitive races and states, prompted political strategists to increase ad spend on all traditional media, and primarily local TV as usual, while also using digital media on a huge scale for the first time,” the Magna forecast says. In fact one-fourth of political dollars (about $1.5 billion) went to digital media, which is triple the amount in 2018. Political at local television grew 30% over 2016 to $3.6 billion while national television shot up 32% to nearly $300 million.
For 2021 Magna calls for eight of the ten key ad categories to improve and increase spend over 2020. As COVID restrictions are gradually relaxed, Entertainment, Restaurant and Food & Drinks brands will benefit but Automotive and Travel “will remain financially fragile.”
High unemployment rates mean fewer people making large purchases and the lingering COVID effects will lead to fewer people traveling. Even if travel and auto consumption recover, Magna predicts they will “remain cautious with marketing costs and start with direct media rather than linear media.”
Assuming vaccinations lead to “semi-normal” business conditions for most of the year, the Olympics finally happen, and the predicted economic recovery comes to fruition, Magna is calling for U.S. ad sales to grow 4% in 2021to hit $230 billion, which would surpass the 2019 high. For radio it is calling for a 1.4% increase in 2021, following a 28.2% decrease in 2020. Total linear media will drop 2.8% next year after a 15.8% decline in 2020.
“The return of consumer mobility, major events and economic recovery will prompt most industry verticals to grow their linear advertising budgets in 2021, but the long-term trajectory has shifted even further towards a digital-centric marketing environment for years to come,” Létang says.