This Year, Next Year: US mid-year media forecasts
The downturn in the US ad market that began in late March is starting to slow
The US is facing challenges of historic proportions. Protests against longstanding and persistent institutionalised racism and societal inequality are dominating the political landscape. These issues are compounding the consequences of the economic and social restrictions brought about by the COVID-19 pandemic.
However, there is some positive news on the horizon for the US ad market as a decline that began in late March shows signs of abating. Excluding political advertising, a 13% decline is expected during 2020, followed by 4% growth next year on a comparable basis. But if you include the revenue from political advertising, which is forecasted to expand significantly in 2020, the US market will fall by only 8% in 2020.
For context, a 16% drop was seen during the 2009 financial crisis. It’s surprising that we “only” expect a 13% decline in 2020 when the 2020 economic downturn is so much worse than 2009: in nominal terms, GDP declined by 1.8% in 2009, while 2020 will probably see a fall of something closer to 4% on a comparable basis.
So why is that? Here are the key predictions from the This Year, Next Year: US Mid-Year Forecast Report.
Eight key takeaways
- Digital advertising is expected to decline by only 3% during 2020, on an underlying basis; or remain flat, if political advertising is included. Regardless of the base, we expect a rebound in 2021, with underlying growth of 12% (or 9% including political advertising). Political advertising activity should amount to approximately $3 billion this year across all digital media.
- Television advertising is expected to decline by 7% in 2020 and fall by another 12% next year. National TV should decline by around 11% this year, followed by growth of 6% in 2021. Digital extensions and related media such as Hulu and Roku will fare much better, with only a modest 3% decline in 2020 and a 15% gain in 2021. We estimate those digital extensions will amount to around 14% of total national TV spending this year. Local TV could see a more substantial underlying decline of 34% this year, though, because of the weakness in local retail and automotive advertising, but it should rebound slightly – by 10% – next year. Including political advertising, however, we believe local TV will probably grow slightly – by 1% – during 2020, due to around $8 billion in political advertising compared to $5 billion during 2018.
- Print media is expected to decline by 26% in 2020 and a further 20% in 2021. Publishers are generally expected to disinvest in their operations, aside from a handful of premium news publications. While investments in digital extensions will help on the margins, both print and digital publishers will generally continue to lose a share of the market to other forms of media, especially digital media owners who have generally been better able to satisfy marketers’ goals.
- OOH (out of home) advertising is set to decline by “only” 21% this year, with second quarter cuts to spending more muted than we have seen in other markets around the world. This is perhaps, in part, because the US didn’t shut down as comprehensively during the pandemic as many other countries, but it is also due to the fact that many budgets would have been agreed on an ongoing basis prior to the pandemic. On the upside, we estimate that digital revenue will account for 38% of the medium’s activity this year, rising to 40% next year.
- Audio media is expected to fall by 24% this year and then a further 7% next year. Overall, audio remains cost-efficient and the growth in digital formats, especially podcasts, generally makes audio more appealing to marketers. Digital activity – which we predict will account for 17% of revenue in 2020 – should continue to expand its share of the medium, though overall audio is likely to decline slightly on an ongoing basis.
- Direct mail is estimated to generate around $15 billion in revenue during 2020, down 16% on an underlying basis but down by only 7% if we include political advertising. We expect to see only a modest -2% underlying decline next year (or 11% including political ads). Directories are expected to decline by 38% this year and another 34% next year. We expect directories will generate less than $1 billion in revenue during 2021 – well below the $17 billion peak in 2005.
- Political advertising is estimated to see $15 billion in spending during 2020 compared to $8 billion in 2018. We estimate slightly more than half of this will go to local TV, and much of the activity will be concentrated in swing states, which usually account for a minority of the country’s population. It is possible that this growth could accelerate further in 2020, especially because figures from 2019 do not include the bulk of activity from the Michael Bloomberg presidential campaign, as most of that data has yet to be made available by the FEC (Federal Election Commission) for analysis. It also remains to be seen whether the current racial inequality demonstrations will lead to an increase in political fundraising.
- 2021 and beyond. If a COVID-19 vaccine is developed and distributed at some time in the first half of 2021, we should see all the activities that have been made particularly challenging due to social distancing return in some form next year. Events such as the Olympics should take place and professional sports will resume. It is hoped that economic activity will return to its normal rate after 2022. However, the scale of decline and the action taken now will have implications for the pace at which the economy expands and the time it takes to return to even 2019 levels.
06 July 2020
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