Madison and Wall: Saturday Summary
For the week ending October 28, 2023: 3Q23 looks like it was another solid quarter For advertising, unevenly distributed
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A massive deluge of earnings this past week. For simplicity we can see that companies focused on digital media probably grew their advertising business by around 10-15% during the third quarter while “traditional” media companies typically saw declines of around 5-10%. With more data out in the next couple of weeks we’ll have a firm reading on the third quarter before long, but if we recognize that 60-70% of advertising revenue goes to the companies growing 10-15% and if 30-40% of the revenues go to those declining 5-10%, you still get a 5.5% growth rate (note that this isn’t a final estimate for the third quarter, but an illustration of how we can be somewhat confident that the overall industry did fairly well in the third quarter). You can read more about my takes on many of the past week’s reporters here.
It all reminds me of the William Gibson quote about the future. Growth in advertising is here: it’s just not evenly distributed.
In a separate note, I went back to one of my favorite sources of data – the IRS – to illustrate how during the 2010s, advertising growth was equally driven by large and small brands alike. Or, put differently, it’s not likely accurate to convey that the industry’s significant outperformance was due to self-service advertising at Meta and Google enabling more spending from smaller marketers. As I’ve argued in my many descriptions of how creative destruction impacts the advertising economy, the advertisers who have emerged in recent years are simply different than those who emerged in prior decades, and they have been predisposed to spend on digital media in large part because businesses formed in the past couple of decades have often organized their operations around internet-enabled business processes.
As two of the largest “traditional” media companies – Disney and Warner Bros. Discovery – report their third quarter results next week, this industry-wide and economy-wide trend will be something to keep in mind.