New Quarterly US Ad Forecast, More Google Ad Tech Analysis, Analysis of Retail Industry + Profit Impact From Retail Media, Amazon’s Agency Review and More Top 100 Marketer Commentary
Madison and Wall: Saturday Summary for September 7, 2024
We wrote extensively during a holiday-shortened week, starting with an update to our prior week note on Google’s ad tech business. After reviewing additional court filings made available in association with next week’s anti-trust trial, we were better able to quantify the spend advertisers placed through DV360 and other products including AdMob, GAM, CM360, AdSense and Google Ads. This allowed us to better assess the of company’s competitive positive vs. companies including The Trade Desk, Pubmatic, Innovid and others.
Next, the big piece of research we published this past week was our quarterly advertising industry update for the United States, where we calculated the second quarter’s final (or provisionally final) growth rate of 9.6%, excluding political advertising, and refined our forecast for the remaining quarters of this year through 2028. For all of 2024 we now expect 7.2% growth excluding political advertising as total advertising sales approach $400 billion in annual revenue for media owners. The bigger-picture take-away is that the industry continues to grow at a remarkable pace, aided by a still-healthy economy.
Looking at different groupings of media, digital advertising platforms continue to take the bulk of share (although open web-based properties are struggling on a relative basis), led by retail media. Television is soft, although slightly stronger than we expected (aided by the stronger-than-expected overall ad market), with national TV including its CTV variants declining by -1%.
To be sure, this shouldn’t be viewed positively, especially as the broader ad market was almost 1100 basis points stronger. After a brief shift to growth in the third quarter of 2024 in association with marketers shifting budgets to fund Olympic activity, declines should continue thereafter at the national level as share losses continue. Local broadcasting is experiencing weaker-than-we-might-have-expected political advertising, which should have been a bigger boost for that sector. Although the second half will see the bulk of spending as it always does in political years, it probably won’t grow as much as would have been originally expected.
Among other media, which collectively account for 16% of the industry’s total, outdoor advertising and direct mail were up slightly in 2Q24, excluding political advertising while audio was flat and publishing (including pure-play digital publishers) declined. Although direct mail likely reverts to a modest decline, these trends should otherwise persist for the foreseeable future.
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Going a little deeper on retail media, we subsequently published an extensive piece of analysis on the revenue growth and operating income profiles of 12 of the largest retailers in the United States (including Walmart, Target, Kroger, Albertsons, Best Buy, Costco and many more) focusing on a decade of their individual and collective financial results in order to understand the benefits of retail media for those businesses. We illustrated further how retail media can drive a significant share of operating income growth for these companies, even when the total revenue figures are relatively modest.
Looking at agencies, the world’s biggest advertiser – Amazon – announced the results of its agency review. As we explained in some detail, knowing that Amazon shifted their primary relationship away from Interpublic and towards both of Omnicom and WPP doesn’t necessarily tell us much about the financial impact of the news. Multiple consecutive wins or losses do start to relate to the financial trajectory of an agency holding company, but even then what often matters more in determining the health of a Holdco is the ability to manage existing clients as profitably as possible.
Finally, we also reviewed marketing-related commentary from other large marketers who spoke at investor conferences this week, including Coca-Cola, Colgate-Palmolive, General Mills, Kraft Heinz, Mondelez and Verizon. In general, CEOs and CFOs continue to exude positivity towards spending on advertising and marketing, consistent with the results we see and expect to see from media owners in the near term.