By Michael Bürgi, Published by Digiday
Netflix’s recent capitulation to adding advertising to its revenue stream means yet more marketing that consumers will be exposed to.
That could pose a problem for all the connected TV providers that offer ads, according to a new study about to be released by IPG’s Magna unit in association with contextual intelligence platform GumGum, which is in the business of suggesting new ad solutions to digital platforms. However, the study suggests that ad-supported CTV providers roll out overlay ads, which they found to be less intrusive, more affordable and slightly more sticky.
For starters, overlay ads run literally as a small amount of signage appearing in the content, either in one corner or along the bottom of the screen — rather than interrupting programming with a traditionally rendered ad message. Though there’s widespread debate over exactly which company first employed overlays, they haven’t yet caught on broadly, given they’re not easily incorporated into the post-production process, according to GumGum CEO Phil Schraeder.
As for the study, which Digiday obtained ahead of its release today, Magna’s Media Trials unit recruited 807 respondents ages 18-54, who were then randomized into exposed and control groups who were asked to watch a 30-minute streaming show of their choice which included :15 and :30 video ads or :06 overlay ads. Advertisers in the test included Viacom, New Balance, Tracfone and the Mini car brand.
“CTV is the space that has the most potential, but so little is happening when it comes to ad format innovation,” said Kara Manatt, Magna’s Executive VP of Intelligence Solutions. “I think a lot of people in the industry, including our clients are concerned about obviously capturing and holding consumer attention. That topic never goes away, because it’s a consistent problem.”
Perhaps the most troubling finding for ad-supported CTV providers is the fatigue viewers feel about the amount of ads they’re seeing. A total of 65 percent registered an increase in the number they’re exposed to — 71 percent of respondents 18-24 noticed an uptick, higher than other demos. That younger age bracket also tries harder than older respondents to avoid ads all, or at least some, of the time.
The study also found that overlay ads don’t “feel” as invasive as regular spots. When four overlay ads were served to participants, they perceived an average 1.72 ads; whereas when they were served six video ads, they perceived an average 5.33 ads. Overlays also are generally perceived as less distracting — according to the study, only 17 percent agreed or strongly agreed they disrupted the viewing experience.
“How do we help brands see and test these alternatives that could really be more powerful, more effective, but also set the advertiser and their partners up for where the future is ultimately going,” said Schraeder.
Overlay ads, according to the study, offer even a slight bump (+5 percent) in brand favorability along with a 4 percent purchase intent bump. His suggestion to marketers: look for opportunities to place the overlays contextually in the content. (The study showed a sample overlay of a kitchen mixer when the content included a baking recipe.)
Schraeder added the research can also guide advertisers and agencies toward new solutions in even more nascent ad environments than red-hot CTV. “When we think about where this is all going, the next big [opportunities are] in gaming,” he said. “We’re looking at what the meta[verse] looks like, and all of these new emerging digital environments.”
MAGNA ADVERTISING FORECAST: SPRING UPDATE (MARCH 2022)
MAGNA REVISES U.S. AD MARKET OUTLOOK DOWN BY 1% BASED ON ECONOMIC IMPACT OF RUSSIAN INVASION OF UKRAINE
MAGNA reduces its 2022 advertising spending growth expectation due to economic and geopolitical uncertainty, but media owners’ ad revenues should still grow by +11% this year to pass the $300 billion milestone.
KEY FINDINGS
Final 2021 estimates: US advertising revenues grew by a record +25% to reach $287 billion. As expected, the pace of growth continued to slow in the fourth quarter:
- +14% YoY compared to +26% in 3Q21 and +46% in 2Q. All media types benefited from the strong economic environment and spending recovery, notably Search (+42%), Social (+36%), Audio (+24%) and Video (+12%).
- For 2022, the geopolitical crisis leads MAGNA to anticipate lower-than-expected economic activity, continued supply issues and protracted inflation.
- On the other hand, organic growth drivers remain strong and Mid-Term elections will bring $6.2 billion in incremental ad revenues (+41% vs 2018 cycle).
- Overall, MAGNA reduces its 2022 growth forecast by one percentage point vs. pre-Ukraine expectations: media owners advertising revenues will grow by +11.5% to reach $320 billion, passing the $300 billion milestone for the first time (previous forecast +12.6%).
- Technology, Telecoms, Entertainment, Travel and Betting are among the industries expected to grow advertising spending the most, while Automotive continues to struggle with supply issues.
- Most media types will grow advertising revenues again: Search (+17%), Social (+16%), OOH (+11%) and Cross-Platform Video (+8%).
Vincent Létang, EVP, Global Market Intelligence at MAGNA and author of the report, said: “The Ukraine crisis has already hit consumer and business confidence. It will slow down economic growth in 2022 and fuel the inflationary trend. It is too early to assess the depth and length of economic repercussions, but MAGNA believes the U.S. economy is strong enough to weather this new challenge. Looking at marketing and advertising, the macro-economic headwind will be mitigated by continued organic drivers (innovation, emerging verticals, ecommerce) and stronger-than-expected political fundraising (leading to at least six billion dollars in incremental ad spend). Balancing all factors, MAGNA reduces its 2022 advertising revenue growth forecast by one percentage point, as media owners’ ad revenues will grow by +11% this year to pass the $300 billion milestone for the first time”.
AFTER RECOVERING FROM COVID, THE ADVERTISING MARKET IS FACING NEW CHALLENGES
Before the invasion of Ukraine and the geopolitical crisis it triggered, the 2022 forecast consensus was another year of robust economic growth in the U.S., e.g. +3.7% for real GDP. Economists predicted a mild slowdown in economic activity, compared with the v-shaped recovery of 2021 (GDP +5.5%), with the main economic indicators remaining above the pre-COVID long-term averages, while inflation would gradually slowdown from the 2021 spike as supply chain issues would fade away.
However, since the war broke in Ukraine, uncertainty and volatility have come back. The stock market was hit; oil prices grew from $90 to $130 before stabilizing – for now – around $110; regular gas averaged $4.30 a gallon on 03/14 compared to $3.50 mid-February and $2.80 in March 2021. The economic sanctions against Russia will also hurt the global economy and rekindle the global supply crisis. Pre-Ukraine, U.S. consumer inflation was expected to slow from 7% in 2021 (headline CPI inflation) to +3.8% this year, but now prices, costs and wages are likely to stay inflationary (5% to 7%) for at least one more year.
As for economic activity, economists have already revised their 2022 GDP growth expectations downward between half a point and a full percentage point. Goldman Sachs, for instance, revised its forecast from +2.9% pre-Ukraine to +2.1% in early March. The combination of higher inflation, stock market volatility and economic uncertainty already hit consumer confidence, which fell to index 59.7 in early March, its lowest level in more than ten years (lower than any point into the COVID crisis).
Despite the geopolitical crisis and stress on energy markets, the U.S. economy’s fundamentals remain strong for now, with low unemployment, stronger savings than pre-COVID, and consumer mobility expected to resume its recovery as we emerge from the Omicron wave of January 2022. Moreover, marketing activity and advertising demand will continue to be driven by both organic and cyclical factors in 2022: marketing innovation will continue to fuel competition and advertising spending; Winter Olympics and mid-term elections are generating incremental advertising spending.
POLITICAL ADVERTISING WILL MITIGATE THE UKRAINE HEADWIND
The major cyclical driver in 2022 will be the November elections. With $5.7 billion already raised by February according to the Federal Election Commission (+72% vs 2018 at the same stage), MAGNA now expects incremental advertising revenues generated by political campaigns to reach $6.2 billion for media owners for the entire cycle. This would represent an increase of +41% vs the previous mid-term cycle in 2018 (our previous forecast was +31%). Local television may get $4.2bn (+26% vs 2018), Direct Mail $600 million, and Digital Media formats close to $1.5 billion.
In addition to political spending, ballot measures will bring millions of dollars into local and digital media. Already 77 statewide ballot measures are scheduled for the November election, on various topics including abortion, marijuana, sports betting, environment and voting rights.
AD MARKET TO PASS THE $300 BN MARK THIS YEAR
Considering remaining drivers and growing headwinds, MAGNA adjusts its short-term advertising revenue forecast downwards by one percentage point in this spring update. Media owner revenues are still expected to grow in 2022 to $320 billion, a new all-time high. However, our top-line forecast (all-media, including cyclical) goes down from +12.6% in our previous update (Dec. 2021), to +11.5% in the March update. Excluding cyclical effects, 2022 growth will be +10%, down from +28% in 2021.
Technology, Telecoms, Entertainment, Travel and Betting are among the industries expected to grow faster than average, while Automotive continues to struggle with supply chain issues.
Search advertising sales will grow by +17%, as demand for lower-funnel media channels, and organic growth of e-commerce spending should mostly insulate Search from macro-economic volatility. Social Media ad sales will grow by +16% (incl. political) in 2022 down from +27% in 2021 (+20% in 4Q21). Two factors are contributing to slower growth for the channel looking forward: Volume saturation (reach, consumption and ad impressions are now plateauing again after the COVID surge), and an erosion in pricing power and brand attractiveness as millions of social media app users on Apple smart phones opted out from targeted ads in recent months. Meanwhile Short-Form Pure Play Video will continue to grow strongly (+23%) benefitting from continued consumption growth and political spending.
National TV ad revenues (cross-platform national long-form video) will stabilize around -1% (traditional ad sales -5%, AVOD/OTT/CTV +27%). Local TV ad revenues (cross-platform local long-form video) will grow by +16% in 2022, thanks to record political spending and despite the continued weakness of one key vertical, car dealers.
Cross-Platform Audio advertising revenues (linear radio, streaming and podcasting) will grow by +5% (linear radio flat, digital audio +15%). Audio media will also suffer from the continued weakness of the Automotive vertical but benefit from the recovery of consumer mobility and the growing adoption of digital audio.
OOH advertising revenues will grow double-digits again (+11% to $8.2 billion), as consumer mobility recovery helps the Transit segment (+29%), which lagged Billboards and Street Furniture in 2021. During COVID (and despite a severe loss in revenues in 2020) OOH media owners have continued to invest in the conversion of premium locations to digital ad units, attracting new advertisers (Sports Betting, Finance, Streaming etc.) and generating additional revenues per location. Revenues from digital OOH units will reach 30% of total ad sales.
Finally, cinema advertising revenues will recover to approx. $450 million (+170% vs 2021). After a disappointing year in 2021 (full-year ad sales reaching just 24% of pre-COVID levels), cinema advertising will enjoy its first quasi-normal year since 2019. Admissions and audiences will be boosted by a large slate of blockbuster releases that were delayed in 2020-21 e.g. Batman, Spiderman, Black Panther, Avatar, Dr Strange, Bullet Train, Hotel Transylvania etc.
Next MAGNA forecast update (US+Global): June 2022.
ABOUT THE RESEARCH
The MAGNA market research is media centric. We estimate net media owners advertising revenues based on a bottom-up analysis of media companies financial reports and data from media trade organizations. Other ad market studies are based on tracking ad insertions or consolidating agency billings. The MAGNA approach provides the most accurate and comprehensive picture of the market as it captures total net media owners’ ad revenues coming from national consumer brands’ spending as well as small, local, “direct” advertisers. MAGNA forecasts are based on economic outlook and market shares dynamic.
The full report and dataset, accessible to Mediabrands agencies and MAGNA subscribers, contains more granular media breakdowns and forecasts to 2026. To access full reports and databases or to learn more about our market research services, contact [email protected].
ABOUT MAGNA
MAGNA is the leading global media investment and intelligence company. Our trusted insights, proprietary trials offerings, industry-leading negotiation and unparalleled consultative solutions deliver an actionable marketplace advantage for our clients and subscribers.
We are a team of experts driven by results, integrity and inquisitiveness. We operate across five key competencies, supporting clients and cross-functional teams through partnership, education, accountability, connectivity and enablement. For more information, please visit our website: https://www-wp-stage.magnaglobal.com/and follow us on LinkedIn and Twitter.
MAGNA has set the industry standard for more than 60 years by predicting the future of media value. We publish more than 40 reports per year on audience trends, media spend and market demand as well as ad effectiveness.
AD GROWTH WILL SLOW DUE TO RUSSIA-UKRAINE WAR—MAGNA FORECAST
By Adrianne Pasquarelli, Published by Ad Age
The IPG firm lowered its 2022 forecast amid economic uncertainty
U.S. ad spending will experience lower-than-anticipated gains this year as a result of Russia’s continuing war with Ukraine, according to a new forecast.
MAGNA reports that media owners’ advertising revenues will grow by 11.5% this year—a single percentage point below the 12.6% growth the IPG shop had previously forecast for 2022. Revenue is expected to reach $320 billion this year, exceeding the $300 billion mark for the first time, as the earlier forecast anticipated.
“Now with Ukraine, economic growth will be slightly lower and how much lower no one can tell, it depends how bad how long this geopolitical crisis will be,” said Vincent Létang, executive VP of global market intelligence at MAGNA.
In the report, he wrote that “the Ukraine crisis has already hit consumer and business confidence,” and noted that such economic repercussions now factor into MAGNA’s ad forecast. Magna expects spending in categories hit hard by supply chain issues, such as automotive, to suffer while industries such as technology, telecom, entertainment, travel and betting are expected to grow.
Yet there are some bright spots that might offset the decline. Political spending ahead of the midterm elections will be one contributing factor, MAGNA reported, noting it expects incremental advertising revenue from political campaigns to reach $6.2 billion this midterm cycle, a 41% increase versus the 2018 midterm elections. The category is led by gains in local television, direct mail and digital media formats.
Channel gains are expected in digital media, which saw huge growth in the last two years, and out-of-home, which is making a comeback following a decline during the early days of the pandemic. Search advertising sales will grow by 17% this year, and social media ad sales will increase 16%, a slower rate than the 27% gain last year.
With more employees returning to offices, advertisers are seeing an opportunity for a renewed interest in out-of-home advertising.
“Consumers will resume normal mobility and that will help out-of-home to recover by a further 11%,” Létang said. The report also found that cross-platform video will remain strong.
MAGNA also reported its final sales estimates from 2021. The agency found that advertising revenue grew a record 25% to $287 billion, though the pace of such growth slowed slightly in the fourth quarter—revenue was up 14% year-over-year in the quarter after a 26% increase in the third quarter, for example.
MAGNA plans to issue its next quarterly report in June.
Read the article at AdAge
March Madness 2022 TV Viewing Pacing Ahead of Last Year
By Brian Hughes
For the second year in a row, the NCAA Men’s Basketball Tournament has proven to be a highly unpredictable one, defying fans’ and experts’ opinions, and busting a lot of brackets across the country. Some of the biggest stories to emerge thus far include defending champions Baylor losing to number eight seed UNC in the second round and underdog Saint Peter’s University (a number 15 seed) beating both Kentucky and Murray State to advance to the Sweet 16.
In terms of broadcast and cable viewership, upsets and close games are always good for driving viewer interest, and thus far audience levels are pacing ahead of last year’s tournament among most key demos, with the exception of adults 18-34 (a trend that has been consistent across live sports telecasts). Among adults 50+, viewing has even been on par with the pre-COVID 2019 tournament, though it is the only demographic segment for which that is the case.
Looking at ratings by round, the First Four games were down compared to last year’s, likely due to the anticipation that had built up in 2021 after the tournament was cancelled in 2020. This year’s opener did still come in ahead of 2019, however. Moving on to the first round, audiences slipped compared to both 2019 and 2021, though for most demos, declines stayed within the single digit range. The second round bounced back strongly, seeing 20-30% percent increases across the board relative to last year but still falling short of 2019. It did have the advantage of all games once again airing over the weekend, whereas last year some second round broadcasts ran on Monday.
The Michigan State versus Duke game on Sunday March 20 was the most-watched of the tournament thus far, as fans pulled for legendary Duke coach Mike Krzyzewski to bring home the trophy in his final season before retirement. Coach K and the Blue Devils did ultimately advance to the Sweet 16. Michigan’s second round upset of the number two-seeded Tennessee Volunteers came in second, with a close contest between Creighton and Kansas rounding out the top three.
Newsweek
Canela Media
Newsweek is a premier, Black- and Asian-owned news magazine and website that has brought high-quality journalism to readers around the globe for over 80 years. Newsweek provides the latest news, in-depth analysis and ideas about international issues, technology, business, culture and politics. In addition to its online and mobile presence, Newsweek publishes weekly English print editions in the United States, Europe/Middle East/Africa and Asia as well as editions in Japanese, Korean, Polish, Serbian and Spanish.
Website:
Newsweek.com
Contact:
Jason Webby
Chief Revenue Officer
[email protected]
