The Daily: The Daily: Checking in on ad spend—What’s been driving growth this year, why it might be about to slow down, and a preview of 2025

Audio by Marcus Johnson, and Ross Benes | Oct 14, 2024

Episode Transcript:

Marcus Johnson (00:00):

See how this episode is sponsored by TikTok for Business. Very mindful. Using their measurement solutions reveal the true impact and performance of your ads. See? Very demure. Learn more about better measurement on TikTok at TikTok.com/business.

Ross Benes (00:19):

To grow 75 billion year over year is quite a bit. Just the numbers are so large at this point that you could look out in a percentage term and say growth is slowing down. But the incremental spend year over year is still, we expect to be quite high.

Marcus Johnson (00:40):

Hey gang, it's Monday, October 14th. Ross and listeners, welcome to the Behind the Numbers daily, an EMARKETER podcast made possible by TikTok. I'm Marcus. Today I'm joined by one of our senior analysts who covers everything digital advertising and media for us. He is based just North of New York City. It's Ross Benes.

Ross Benes (00:58):

Hey Marcus.

Marcus Johnson (00:59):

Hey chap. Today's facts. All right Ross. So folks may or may not know that you are a big wrestling fan. This is the WWE, WWF if your old school variety. And so I have some WWE, WWF facts. I have three. You have to get two of them right to pass slash win the game.

Ross Benes (01:18):

Okay.

Marcus Johnson (01:19):

Ready?

Ross Benes (01:19):

Yep.

Marcus Johnson (01:20):

Name a famous wrestler to never win the belt?

Ross Benes (01:24):

To never win the heavyweight championship belt? Oh man, I don't think Owen Hart won the,-

Marcus Johnson (01:31):

Owen hart is one correct answer. Yes. Very nice.

Ross Benes (01:35):

Okay.

Marcus Johnson (01:35):

You could have had Jake the Snake Roberts, Jesse Ventura, Ted DiBiase, Owen Hart and there's a fair few others as well. So you're off to a good start. Which wrestler once fell asleep during a match?

Ross Benes (01:48):

Oh, God. I have no idea. Rick Flair.

Marcus Johnson (01:55):

It does sound like something he'd do. The tallest wrestler.

Ross Benes (01:57):

Andre the Giant.

Marcus Johnson (01:58):

Andre the Giant. Yeah, seven four. He once fell asleep during a match. Although maybe he's not tall. Was The Big Show taller?

Ross Benes (02:05):

I don't know.

Marcus Johnson (02:05):

Similar height.

Ross Benes (02:06):

Because the heights that they give are so fictitious that you can't go off of a program like you would with a basketball roster.

Marcus Johnson (02:14):

That's true. That's true. Let's see if we can get his tight quick. Okay. Yeah, I think Andre the Giant was a little bit higher. Seven, four versus seven foot, if these are accurate measurements, but anyway.

Ross Benes (02:24):

They are probably not.

Marcus Johnson (02:25):

One out two, one out two. This one to seal the deal. Who has won the most matches ever at WrestleMania?

Ross Benes (02:34):

The Undertaker.

Marcus Johnson (02:34):

Bang. Ross for the win.

Ross Benes (02:37):

There we go.

Marcus Johnson (02:38):

Very nice fella. Very nice. That concludes our WWE, WWF facts of the today. Today's real topic. We check in on the US ad market. All right folks, we're talking about the US ad market today. We'll check in on how year's going, what we expect for next year. But let's start with a piece that our colleague, senior director of briefings, Jeremy Goldman recently put out writing how search, social, connected TV and retail media performed through 2024's first half. In it, he notes that digital advertising is actually outperforming at the midway points of the year according to EMARKETER forecasts. But what's been the main driver of growth Ross? As I mentioned, he said search, social, CTV and retail media. What to you, which of those stories, if you will have been the most interesting of the year so far?

Ross Benes (03:35):

Retail media interesting so far because it's newer, so it's less clear who the established players in that field will be other than Amazon. Whereas in search, it's so entrenched.

Marcus Johnson (03:50):

And so in the retail media space, I mean are there certain networks that are popping up or maybe I should say commerce, media, certain parts of commerce media that interest you the most or you think have been biggest drivers this year?

Ross Benes (04:02):

Well, Walmart's interesting because they're such a retail juggernaut in general. Seeing them trying to make the digital transition has been interesting and they've like, I'm mostly curious what they're going to do with Vizio since they acquired the TV maker. How are they going to use all that ACR data that they have and what's the licensing of all that stuff going to look like in the future now that Walmart has it?

Marcus Johnson (04:27):

Yeah, yeah. I mean it's interesting you mentioned video because when we're looking at driving forces of growth this year, I mean I mentioned search and social and CTV and the rest of it, if you look at our March estimates for ad spend video is the driving force growing 20% this year accounting to 36% of the pie. In a few years we're expecting advertisers to basically spend four out of 10 of their dollars on video. And these are from March numbers. We were talking before the show, our total ad spend numbers are going to get a refresh in a month or so. So pro plus subscribers, keep an eye out for those. So Ross leaning towards retail media through most of this year. Do you see that continuing or will retail media start to lose steam and something else kind of take the baton, the baton for the rest of 2024?

Ross Benes (05:11):

Well, there's not a whole lot of time left in 2024, so I'm going to stick with it. We only got two and a half months left.

Marcus Johnson (05:17):

That's true. It's chilling. All right, let's move from the whole year and how things have been going from year to date basically and zoom in on the latest four month numbers that I could find. These are from Guideline's latest U.S. Ad Market Tracker saying, US ad spending grew at 12% year-on-year in August. That's down a bit from last month, but last month was 14%, so still very healthy. Ross, how much to you is non-cyclical ad growth driving this year's numbers, that being the growth that's not from these kind of major tent pole events?

Ross Benes (05:52):

Yeah. So non-cyclical is the bulk of spending. Its most spending. The Olympics are a big deal to linear TV and really a big deal to NBCU, but it's only a few billion dollars total that we're talking about the Olympics. So not a huge driver. Politics is certainly a bigger driver than the Olympics, but I don't expect that to significantly sway a total figure that's over $100 billion. So I would say most of it is non-cyclical.

Marcus Johnson (06:19):

Yeah. Ms. Harris has poured new money into political digital ads since entering the race earlier this summer, so that might have helped a little bit at least. But I mean these numbers are pretty encouraging Ross, this 12%, because it does seem like it's been a sustained recovery for multiple months now. That 12% ad growth in August marks the 16th month of consecutive expansion. Last August the ad market, according to Guideline's tracker, the ad market was below 3% growth. The year before that it was negative two in August. And so this is a very, very healthy 12%. So it's very encouraging and some folks are actually raising their outlooks for the year. Media agency MAGNA raised its US ad spend forecast for the year. Now expecting 11.4% growth, up nearly a whole point from the 10.7 it had thought back in June. Any sense of, I mean we're going to review the numbers or we're going to update the numbers in the next month or two, but given where we're at in the numbers that you've seen, I mean does an upgrade seem likely? You think we're on pace with where we were expecting?

Ross Benes (07:23):

I think we're on pace because we already had a pretty aggressive growth percentage of total US digital ad spend and I believe it was over 10% growth for this year and next year. So the market's certainly been healthy. You cited the figures from Guideline showing tons of months consecutive growth, but to have to raise that significantly would kind of be surprising to me if we went that route just because it's already quite high.

Marcus Johnson (07:48):

Yeah. Yeah, you're spot on with the numbers. For total US ad spending in 2024, we estimated 9.5%. Again, we updated these in March last with a new update coming, but 9.5% is close to double last year's growth. Now again, you've got some events that happened this year, which is going to help that number, but still it's an incredibly healthy figure. We've kind of talked about year to date, we talked about kind of latest four month, but if we look out kind of forward for the remaining two and a half months, as you mentioned for the rest of the year, some folks think ad spend is poised to slow down in the US towards the end of this year as it faces tough year over year comps. Michelle Castillo who's writing in an article for medical marketing and media, she was citing a new forecast from analyst firm, Madison and Wall.

(08:34):

They pointed to a few things Ross. One, as you mentioned, commerce media, they think it's going to cool off a bit. Now they were saying it's been red-hot, so cooling off doesn't mean it's going ice-cold by any stretch. So one, they think commerce media is going to call off a bit, two TV no longer benefiting from the tentpole events it leaned on in the summer with the Olympics, the Men's Euro cup, et cetera. And then also the closure of GARM, so Global Alliance and Responsible Media is making marketers more apprehensive as brand safety becomes a growing concern and they are discouraged from working with certain platforms. They think that's the third reason. Do you agree with Madison and Wall here? Will growth be coming to an end as or slowing down as 2024 wraps up?

Ross Benes (09:13):

Well, about the GARM thing, I don't expect that to lead to reductions in ad spending. Maybe there'd be some changes in where it's allocated. Maybe X certainly is a spot where advertisers are going to be more hesitant, but I don't see why they would be less likely to invest in something like linear TV now that GARM's not around. There's a lot of channels that have been considered brand safe for a while or at least you know what kind of programming you're going to run against.

Marcus Johnson (09:39):

Yeah.

Ross Benes (09:39):

So I don't expect the total to come down from that. But every year at the end of the year with Thanksgiving and Christmas, you still see a lot of budgets getting dumped. So I would be surprised if there was a pullback even after the election in total ad spending because there's going to be all the shopping season stuff coming up and I'm not sure why that would be less this year than it has been in years past.

Marcus Johnson (10:05):

Yeah. I mean this year doesn't seem any easier to try. It might be harder than ever to get a read on what's going on in terms of the state of the economy and the economic climate because a lot of the numbers Ross, look pretty healthy. GDP growth was 3% in Q2, so that's a nice tailwind. Despite ticking up a touch this summer, unemployment's been below 4.5% since 2021. This has been a good run. And then finally inflation is down to 2.5% for the first time since Megan and Harry sat down with Oprah, which was a while ago. So inflation,-

Ross Benes (10:39):

Wow. Do you have that comment prepared all day Marcus?

Marcus Johnson (10:42):

Maybe? I was trying to think what happened back in 2021. I couldn't recall. It's been a long time since inflation has been anywhere near that two and a half percent and that was early 2021. And wages also outpacing inflation, which is helpful. However, a lot of that doesn't seem to matter because I was looking at the University of Michigan's index of consumer sentiment and consumer confidence is seemingly permanently depressed. It used to live at about 100 points. The whole year before the pandemic, it was roughly around 100 points. Now it's a good month if the index gets close to 70 and it's struggled to crack 70 for basically the last three years. And so it's so hard to kind of reckon with that cognitive dissonance of, oh, these numbers look good, but actually people aren't as encouraged or enthusiastic about the economy as maybe they should be given the numbers. I mean, what do you make of that as we kind of head into the last couple of months and the holiday period?

Ross Benes (11:35):

Consumer sentiment doesn't seem to be so down to the point that people aren't going to go out and buy a bunch of stuff like they do every year. And I think it still seems fairly reasonably high. It doesn't seem bleak enough right now to cause marketers not to advertise in Q4. Even if the world news events may be depressing some people, I expect shoppers to be out in full force and advertisers to be trying to persuade them with their budgets.

Marcus Johnson (12:03):

Yeah. Let's close out the episode by talking about next year. Now we've done year to date, we've done current situation, we've done the rest of the year. So let's move to 2025. What are we expecting from ad spend growth in 2025? Again, bearing in mind Ross, that these numbers are likely to be changed slightly or updated in the next month or so.

Ross Benes (12:19):

Well, I was just looking at the numbers we have, and not just for the US, but around the world. The growth in terms of percentage will come down in a lot of countries including the US, but the total amount spent will still continue to grow quite a bit. I mean, in US we're looking to add another $30 billion a year, even if the growth rate's down a little bit. That's a lot of additional spend. 16 billion in Asia. Basically around the whole world if you take everything together, it's like an additional 75 billion in digital, not even total. So to grow 75 billion year over year is quite a bit. It's just the numbers are so large at this point that you could look out in a percentage term and say growth is slowing down. But the incremental spend year over year is still, we expect to be quite high.

Marcus Johnson (13:08):

Yeah. Yeah. It's the law of large numbers at this point. You can only get so big once you get so big, but it is staggering how healthy or surprising how healthy the growth is going to be next year given that you're not going to have those major events that you've benefited from this year in terms of politics and sports. I was looking at buying formats. I mean, next year Ross TV is really going to struggle because of what I mentioned. Those election and sport tentpoles, TV ad spending will go, it's not going to have TV ad spending. It's going to go from plus one this year to negative 13 from,-

Ross Benes (13:42):

And those tentpoles are more influential in TV than they are in the whole. You were asking earlier how much is the growth driven by the Olympics and the election. In television, it's so much of it even in streaming, but in digital less so. Most money of the Olympics is spent on linear TV and most money in politics is still spent on local TV.

Marcus Johnson (13:59):

Yes. Yeah. Although it is interesting because that sounds like quite a swing from plus one to negative 13 from this year to the next. However, because traditional TV will only account for 12% of its next year in the US its effect won't be felt that much because it's basically all digital at this point. Digital accounting for over 80% of ad dollars and that will be keeping the total ad spending figure afloat and then some. Digital growing just under 12% to keep total ad spending growth for 2025 right around 7%. So it's down a few points from this year's 9.5, but still very, very impressive considering that TV is expected to have a pretty terrible year next year. All right folks, that's all we've got time for today's episode. Thank you so much Ross for hanging out with me today, checking in on how ad spending is going.

Ross Benes (14:48):

Thanks, Marcus.

Marcus Johnson (14:49):

Yes indeed. Thank you to Victoria who edits the show. Stuart runs the team, Sophie does our social media. Thanks to everyone for listening in. We hope to see you tomorrow of course, for the Behind the Numbers Daily as an EMARKETER podcast made possible by TikTok.