Facebook, Google face competition from new streaming sites in 2020 ad blitz

By PoliticsFOXBusiness

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New online streaming platforms are poised to offer political campaigns another avenue to reach voters ahead of the upcoming presidential elections, driving a potential windfall for AT&T, Disney and others who are gearing up to launch their own sites.

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Spending on the 2020 races is widely expected to top the record $6.5 billion spent in 2016. And with it, companies ranging from Facebook and Google, to Comcast and Apple could be angling to reap the rewards.

“Anybody that is selling advertising that is of interest to political campaigns are going to have a direct pipe open to the bank in order to take all the money that’s coming,” Steven Passwaiter, vice president at Kantar Media, told Fox Business.

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Federal elections are historically an advertising boom. At Comcast, for example, the 2018 midterms helped drive a 27.7 percent increase in ad spending to $863 million in the fourth quarter.

And at Sinclair Broadcasting Group -- which owns the largest amount of television stations across the U.S. -- spending ahead of last year’s races topped 2016 amounts. The company is expecting media revenues to rise as much as 22 percent in the fourth quarter.

Despite the backlash in the fallout of the 2016 elections over Facebook and Google’s role in advancing misinformation campaign on the part of entities tied to the Russian government, political consultants from both parties say the platforms are still poised to receive the bulk of ad budgets.

Facebook on Wednesday said its ad revenues rose 30 percent in the fourth quarter to nearly $17 billion.

TickerSecurityLastChange%Chg
FBFACEBOOK INC.189.93-0.21-0.11%
DISWALT DISNEY COMPANY132.27-1.03-0.77%
TAT&T INC.37.91+0.76+2.05%
CMCSACOMCAST CORP.46.36-0.32-0.69%

But new online streaming sites will offer campaigns a fresh platform that combines the targeting capabilities afforded by digital advertisements with the benefits of a captive audience similar to traditional television.

The issue to-date, however, has been the lack of available outlets. In 2016, Hulu captured much of the spending, along with Roku, Republican and Democratic political consultants say. But with Disney, AT&T, Apple and others planning to launch their own platforms, campaigns are ready to capitalize on the influx.

“It’s really high quality, it’s TV quality, but you can buy it like you would buy a digital advertisement,” Joe Mansour, co-head of digital at FP1 Strategies, said. “As the inventory increases, that’s going to be a bigger and bigger piece of the pie.”

Still, some experts remain skeptical of the benefits.

“There’s no question that every possible means of carpet bombing states is going to be used and that includes digital. Whether that is a cost effective strategy, the jury is out,” said Donald Green, a political professor with Columbia University. “No randomized controlled trial conducted by a firm other than…Facebook has ever shown an appreciable effect.”

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Absent the potential benefits of increased advertising opportunities, companies are spending billions to build new streaming sites that are slated to combine original programming with licensed content.

Apple, for example, has hired top talent from Sony Pictures and signed lucrative deals with movie studios like A24. Among the most high-profile announcements was a partnership with Oprah. CEO Tim Cook, however, has declined to provide many details on the new effort.

“We’ve hired some great people that I have a super amount of confidence in and they’re working really hard,” he told investors on Wednesday.

Disney, meanwhile, is close to finalizing its purchase of key 21st Century Fox assets. The acquisition was intended to help bolster the offerings available on the soon-to-launch Disney Plus. The company is expected to pull licensed content from other sites like Netflix in advance of the launch, as well as spend upwards of $24 billion to produce their own programming.

Disney “spends more on content than anyone else globally, it has decades of experience in making excellent content, it has a huge balance sheet with low leverage and it’s a brand that’s known the world over,” Steven Cahall, an analyst with RBC Capital Markets, wrote in a December note.

AT&T – buoyed by its $85.4 billion purchase of Time Warner – is also preparing to launch its own streaming site later this year. One troubling sign for the company, however, is it ongoing struggles with its existing platform: DirecTV Now. The service lost 267,000 subscribers in the fourth quarter, a dramatic decline from the 368,000 additions the year prior.

CEO Randall Stephenson attributed the decline to the expiration of promotion pricing.

“As we matured the product and as we came out in midyear, we just looked at the customer segment. There was a customer segment at the low end, very promotional pricing who are not engaging on the product,” he recently told investors.

21st Century Fox is the parent company of FOX Business and Fox News. The company sold its entertainment assets to Disney in 2017 and the deal is expected to close in the first quarter which will create the New Fox.