As brands weigh change, ad spend tumbles; Q1 ad buys drop 10.8%

Change continues to roil the U.S. advertising industry as a new report from Kantar Media this week said ad expenditures among the Top 10 ad-spending companies was down nearly 11% in the first quarter and that ad spend among all companies was down 4% to $37.4 billion.

That retreat mirrors spending in all of 2014, when the 10 largest advertisers in the U.S. cut their ad spend 4% to $153.3 billion from nearly $160 billion.

But a quick caveat: The Kantar report tracks spending on TV, newspapers and magazines, with its only digital component being display and search advertising.

While ad spending may be down in traditional formats, other research – some of it from Kantar – has shown spending online and on mobile devices, especially for video advertising, has soared.

“Large advertisers in particular are the ones that are most aggressively moving budgets into digital, and the cost efficiencies of digital advertising enable many marketers to buy more for less,” said Jon Swallen, the chief research officer at Kantar Media North America.

Kantar’s latest report reveals that the change is ongoing.

For instance, ad budgets of eight of the 10 biggest spending industries were down in Q1, Kantar said, pointing to tumultuous times in the industry as where ad dollars are spent – and how – continue to evolve. 

“First quarter results are skewed by comparisons to last year and the $600 million of incremental spend generated by the Sochi Olympics,” said Swallen. “Excluding the impact of special events, core ad spending measured by Kantar Media was down about 2 percent in the period. Even after taking into account assumptions about the growth of spend on other unmonitored media, it has been a relatively slow start for the ad market in 2015.”

Kantar said 16 of 21 media types had lower ad spending in the quarter.

Cable networks, however, saw a 4.1% increase in revenue due primarily to a 3.8% increase in the amount of available paid ad time as networks packed more spots into programming – actually making shows run at a faster pace than they were recorded at and cutting some of their own promotional programming spots – to help offset lower audience ratings.

Spanish-language TV also gained, showing a 4.8% bump in the quarter as more national brands turned to Hispanic stations to reach a burgeoning audience in the U.S. It was up 15% for all of 2014.

Network TV expenditures – without the benefit of last year’s Winter Olympics — were down 9.2% for the quarter, and were flat for the quarter with that additional spending factored out.

Spot TV, which also saw big increases from spending tied to the Olympics last year, slipped nearly 5%.

Kantar said spending by the Top 10 largest advertisers was down 10.6% to $3,709.8 million in the quarter.

Procter & Gamble had $570.9 million in media expenditures, down 24.5% Y/Y, but still the largest advertiser in Q1. It spent less on TV, online display and print media.

T-Mobile parent Deutsche Telekom showed the largest growth rate among the Top 10; it $269.8 million, up 34.8% from a year ago.

Both AT&T and Verizon, meanwhile, lowered their spending, 24.6% ($404.6 million) and 25.35 ($277.0 million) respectively.

The only automotive company in the Top 10, General Motors, decreased its ad spend 30.8% to $411.4 million.

Meanwhile, digital media spending saw more money from traditional TV budgets migrate its way in 2014, nabbing 30% of the market share in the U.S. and growing by 15% to $49 billion, a new report says.

Magna Global said social and video advertising led the growth, up 57% and 39% respectively, and renewed its forecast that digital ad spend would catch up to TV by 2016, with each segment seeing $68 billion in revenues, reported the Wall Street Journal.

The company also updated its August forecast that saw TV spending declining 1% this year, saying it now expects spending to drop 3%, despite more buying of time for political and Olympic campaigns. TV ad spending was up 3% in 2014.

“TV will get a smaller piece of the pie than we previously thought based on our analysis of what happened in 2014,” said Vincent Letang, Magna Global’s director of global forecasting, pointing to modest inflation and declining TV ratings for sluggish TV ad spend.

But Magna also said the shift by consumers from traditional TV to online video has prompted more brands – as radio and print spending already has been cut to the bone – to shave spending on traditional TV and repurpose it online.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn