U.S. Ad Market Posts Seventh Straight Month Of Growth.

The mid-summer advertising market remained in growth mode, even as higher gas prices and inflation continue to weigh on the U.S. economy as marketers increased their investment in advertising. Newly released data from Guideline shows total U.S. ad spending increased 11.9% in July compared to a year earlier. That was smaller than the 20.5% growth rate posted in June when World Cup ad spending skewed the totals. While smaller, it marks seven consecutive months of year-over-year increases in ad spending.

Advertisers continued to pour a larger share of their dollars into digital media in July. Guideline’s U.S. Ad Market Tracker shows digital ad spending was up 11.8% compared to a year earlier. But traditional media recorded even larger gains compared to the prior year. The data shows traditional ad spending was up 12.1% year-to-year. Even so, digital’s share of the ad market was still a dominant 77% of total U.S. ad spending in July as traditional media accounted for the other 23%. Guideline reports ad spending among the top 10 product categories ticked higher by 9.7% in July. That compared to a 14.5% increase by all other product categories — and that could offer some protection if the ad market finds itself on shaky ground.

Guideline Chief Insights and Analytics Officer Sean Wright has been digging deeper into Guideline’s spending data to determine not simply whether the ad market is expanding, but how broadly that growth is spread across advertiser categories. His early conclusion is a market dependent on a handful of categories for most of its gains is considerably more vulnerable than one where growth is broadly distributed.

“Turns out when the concentration of ad spend is really kind of just one or two subcategories driving growth in the market — it’s actually very risky for overall kind of the ad economy,” Wright says on Guideline’s latest podcast. “If it’s one or two things holding up the entirety of where things are going, it ends up being pretty bad for the ad economy overall.”

Wright analyzed spending across 89 advertising subcategories, applying a measure similar to those used by economists to gauge market concentration. He says the results show a striking relationship between how concentrated advertising growth is today and where overall spending is likely to head during the following year.

“When growth is actually spread out across lots of different subcategories, that is actually very healthy,” Wright says. He adds that the degree of concentration today is “super predictive” of where ad spend is going to be in the next 11 to 12 months. That’s potentially significant considering the current state of the market.

Guideline’s data shows overall advertising is growing at about 4% this year. But Wright says those gains are being generated by a relatively small number of players. At the same time, the categories reducing their advertising budgets are much more widespread.

“There’s not a lot behind the 4% growth happening in the market, but there is a lot behind the declines we’re seeing,” Wright cautions. “That makes me think in the short-term things are a little more risky than I would want.”

That doesn’t necessarily mean a downturn is inevitable. Wright says advertising growth tends to move through cycles. Periods when a few advertisers or categories account for an outsized portion of gains eventually give way to periods when spending growth broadens across the marketplace. But concentrated growth can make life more difficult for media sellers in the meantime. When only a handful of advertisers are expanding their budgets, sellers have fewer sources of incremental dollars to pursue and agencies are competing for growth from the same relatively small pool of marketers.

“When too much growth is being held by one or two brands, that doesn’t really work well for publishers,” Wright says. “Agencies also don’t like that because then they have to fight for fewer budgets.”

For broadcasters and other media companies, the analysis could provide another tool for deciding how aggressively to lock in advertising commitments. A highly concentrated market could argue for securing available business sooner rather than counting on demand strengthening later, while broader spending growth could give sellers greater confidence that more advertising dollars will emerge.

See Guideline’s latest U.S. Ad Market Tracker HERE.