Brian Wieser: Updating 2017 Forecast To +4.4% Underlying Growth -- Pivotal Research

Advertising is facing challenges on many fronts especially within the two largest media digital and televisionamp160 Among the large packaged goods marketers and big brands who dominate television we have marketshare losses to smaller brands driving reduced spending for many who budget for advertising as a percentage of revenue and zerobased budgeting tactics for othersamp160 Further there do not seem to be many significant new categories of marketers whose constituents are large consumer focused differentiated themselves on the basis of awareness of attributes budget on a shareofvoice basis and operate in nationally oriented and oligopolistic sectorsamp160 As those categories emerged in the past they drove up pricing for all and revenues for owners of national television properties in particularamp160 Increasingly fragmented and often unmeasured viewing makes it harder if not more expensive to use television efficientlyamp160 So while it remains the quotleast inefficientquot medium for many it39s difficult to see a path to growthamp160 We generally see ad revenue growth at national TV media outlets declining by around 2 each year going forward excluding incremental spending associated with the Olympics similar to our expectation for this yearMeanwhile digital advertising is having a moment and not a good oneamp160 Beyond ad quality issues we have concerns that marketers will concern themselves more with basic trustworthiness of media owners the capacity to use personal data going forward as well as the underlying effectiveness of digital media more generallyamp160 Ad quality issues of viewability brand safety fraud and bots are problematic of course but ultimately seem relatively manageable for marketers vs the latter group of problemsamp160 Facebook39s recently publicized issues around mismatches between audience data provided for planning purposes vs data from global census bureaus and its initial inability to find ads from Russian propogandists follow on several other incidents over the past year all of which compromise claims Facebook makes to marketersamp160 This has tangible implicationsamp160 A significant share of spending on advertising occurs simply because it is perceived to be effective or because tools used to assess spending effectiveness are really used to justify a choice or refine preexisting budgetsamp160 Whether a collection of media and creative choices are actually the most effective is a subjective question even in a world awash with data which is why marketer trust mattersThis has been laid bare in recent comments and actions from executives at companies as diverse as Procter ampamp Gamble Uber and Restoration Hardwareamp160 PampampG eliminated 140mm in digital advertising in the second quarteramp160 As conveyed in a lawsuit with one of its advertising agencies Uber eliminated spending on app installs earlier this yearamp160 Restoration Hardware eliminated most of the keywords it was buying from search enginesamp160 In each instance each company indicated there was no negative business impactamp160 While digital advertising can be incredibly effective these three cases are very public examples of the heightened scrutiny that is being applied to digital advertising from the highest levels of marketers39 organizations whereas relatively little rigor was applied beforeamp160 On top of this with looming regulations in Europe around the use of personal data amp8211 with few marketers fully aware of related implications including the global fines associated with violations amp8211 and Apple39s new restrictions on cookies within its Safari browsers marketers must begin looking at new approaches to use digital media more generallyStill for all the risks that follow from these issues we don39t think they will observably impact digital ad growth at this timeamp160 This is largely because performancebased marketing is increasingly common as businesses with digitalcentric business models take share as with Dollar Shave Club vs Gillette and concentrate spending on digital mediaamp160 In total we forecast 21 growth for the medium in 2017Additional data associated with the growth of different types of advertising including local TV radio outdoor magazines newspapers directories and direct mail follows in our model which accounts for the remainder of this noteamp160 We highlight a methodological modification which we expect to refine over time we have derived a crude estimate for app install ad spending backing that figure out of national mass media advertising and placing it within our Direct and SMB categoryamp160 We think this revised baseline provides a better estimate of historical growth and absolute size of brandoriented advertising vs purer performancebased advertising budgets although we recognize that there are still performancebased elements in our national and local groupings of spending much as there are branding elements in our direct totalThe full report including risks and disclosures can be found hereamp160 Ad Forecast 92517pdfThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Brian Wieser: Updating 2017 Forecast To +4.4% Underlying Growth -- Pivotal Research

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Brian Wieser: Updating 2017 Forecast To +4.4% Underlying Growth -- Pivotal Research

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