Political advertising fueled by the presidential election in 2020 and ads on streaming services will likely drive growth on local ad revenues next year, according to a new study
Next year's estimates predict that more than $161 billion will be spent on ads, $7 billion of which could be spent on political advertising in local media as election season heats up, according to BIA Advisory Service, which released its bi-annual “U.S. Local Advertising Forecast 2020” report on Wednesday. That's a growth rate of 5.8 percent from 2019 in which $152.5 billion is expected to be this year, demonstrating the drastic effect election seasons could have on advertisement spending.
“The expectation of an aggressive presidential election next year, along with primaries and state-wide races, indicate that political ad spending will be a serious driver of local ad revenue next year,” Mark Fratrik, the chief economist and senior vice president at BIA Advisory Services, said. “Combine these factors with the ongoing growth of mobile and social advertising and the emergence and future significant advancement in over-the-top (OTT) advertising, the revenue landscape for next year looks robust.”
Meanwhile, "over-the-top" advertising through streaming services and growth in mobile and social media ads make up the rest of next year's surge in ad spending.
Advertisers are expected to spend $29.5 billion on mobile and social media ads in 2020 and that sector is predicted to grow to $44.6 billion by 2024, according to BIA’s forecast. Nearly 40 percent of mobile spending will be tied to native social advertisements, which is content posted directly into a social media network rather than simply posting a link.
However, political advertisements are predicted to drive much of next year's ad spending growth, with varied expenditure based on the location of each election market. BIA reports that $6.58 billion will be spent in local political advertising in 2020, with 47 percent of that to be spent on broadcast television ads.
“Political advertising will vary significantly based on the size of the market and specifics of local elections,” Fratrik added. “As a point of reference, in each of the three top local political revenue-generating markets ... OTA television will get close to 47 percent of the political ad spend across the markets, with online/digital getting close to 22 percent of the political spend.”
According to BIA’s report, the forecast predicts significant advertisement spending on native social in 2020, with native social advertising being the fastest-growing segment of mobile marketing, with a projected growth of 13.9 percent from 2019 to 2014.
The Virginia-based financial consultant firm estimates that total local advertising revenue in the U.S. will increase by $8.8 billion from 2019 to 2020 with a growth rate of 5.8 percent. Traditional media revenue accounts for $94.4 billion, or 58.5 percent, of that $161.3 billion figure for 2020, while online and digital revenue is predicted to increase from $59.3 billion in 2019 to $66.9 billion in 2020.
And as digital user activity continues to shift from desktops to portable mobile devices, BIA’s forecast reports that social media ad revenue currently represents 93.8 percent of total social advertisement spending, and is expected to grow increase by a whopping 96 percent by the year 2024.
“We’ve been carefully charting the growth of mobile and social to track its growing importance to national and local advertisers and its ability to precisely target and reach local consumers,” said Rick Ducey, managing director of BIA Advisory Services. “Now, we expect the emergence of OTT to grow quickly because it can deliver the type of targetability and tracking advertisers require today. Plus, it will give local television stations the opportunity to increase their online revenue. We are tracking this and more in our 2020 forecast to help businesses more precisely understand where ad dollars are going and plan accordingly.”
BIA’s "U.S. Local Advertising Forecasts" provide estimates and predictions on nationwide total U.S. spending for five years, along with individual media forecasts across 13 different media platforms, according to the firm's website.