The final word on 2016 advertising: Great
Soars 6.7 percent, strongest pace since 2005, despite a so-so economy
March 7, 2017
Though the unemployment rate dropped to an eight-year low, many Americans left the labor force, and the housing market cooled as 2016 ended.
The presidential candidates frequently described economic conditions as poor.
But you wouldn’t know that to look at 2016 advertising. Though ad dollars usually follow the lead of the general economy, last year was a particularly bright one for spending.
And that’s led to a decent outlook for 2017.
All that’s based on an analysis by Brian Wieser, senior research analyst at Pivotal Research Group.
He says ad spending grew at a torrid rate of 6.7 percent in 2016, the best pace since 2005.
Take out Olympic and political spending, and growth still remained high, up 5 percent.
That came as a surprise to Wieser based on the mediocre economy numbers.
“Our forecasting model, which is driven by personal consumption expenditures (PCE) and industrial production (IP), suggested that growth should have been under +1 percent,” he says in his analysis.
2016 advertising: Stronger TV and digital
So why the healthier than expected year? It’s not just one thing, of course, but part of it was TV ad spending, which ended the year stronger. After declining year-to-year in third quarter, it was up 1.8 percent in fourth quarter.
Digital remained hot, up 19 percent for the year, with two companies driving those gains.
“The absolute growth that Facebook and Google alone captured was more than double the total growth we saw for the entire advertising industry,” Wieser notes.
Radio and outdoor were flat, while print was, of course, down double-digit percentages.
2017 outlook: Modest growth and uncertainty
Looking ahead, Wieser forecasts a more moderate growth of 2.5 percent for this year.
There’s no national election or Olympics, of course, which is part of the reason growth will be lower.
But Wieser also points to an economic uncertainty that could stretch through the year. With a new president in office, and lots of new legislation on the table, including some related to taxes, there are many factors that could influence consumer spending, which is a major factor in how advertisers allocate money.
If consumers aren’t spending, advertisers won’t either.
“We think that macro-economic uncertainty will prove to constrain the year,” Wieser writes.
“The potential emergence of new tariffs, infrastructure spending, subsidies or changes in regulations for favored companies or industries, changes to tax policies, the degree to which regulators and the law support more consolidation in certain industries and changes involving foreign workers in high and low tech sectors alike are among the issues that may or may not play out in political arenas.”
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