Ad Age grades its industry predictions for 2018
It's that time of year when pundits -- including Ad Age's own reporters and editors -- make predictions about what will happen in the coming year. You can find our prognostications for 2019 here. In the meantime, we look back at what we suggested would happen in 2018 to see how accurate we were.
Jeanine Poggi, senior editor, media & technology
My prediction for 2018: More TV rivals will make nice
"In 2017, frenemy consortiums popped up, such as OpenAP—created by Turner, Fox and Viacom to help standardize audience buying on TV—and NBC Universal gathered a group of leaders (in media, marketing, agency and digital spaces) to kick off a campaign to fix issues like measurement across platforms and devices. This year , A&E Networks, Discovery Communications and AMC Networks will begin testing a method that would prove whether a commercial led a viewer to take action. The word "collaboration" will be overused, but the moves could result in some unusual partnerships between legacy TV networks and digital rivals."
What actually happened: TV networks certainly did play nice. NBC Universal joined OpenAP in April, and Comcast, Charter and Cox partnered with NCC Media to form a new advanced TV ad group. Frenemies met several times during the year, with EY hosting get-togethers, and MediaLink bringing together top sales leaders in Cannes, to brainstorm solutions to things like viewer fragmentation and measurement, and to discuss new ad models. But 2018 was still, predominantly, all talk and little tangible solutions.
E.J. Schultz, assistant managing editor, marketing
My prediction for 2018: Threats persist in auto market
"Auto sales dipped 1.8 percent in 2017, ending a seven-year streak of yearly gains. While newly passed federal tax cuts are expected to help boost buyer confidence in 2018, marketers must contend with rising threats from car-sharing services that offer young urban dwellers an alternative to ownership. As a result, brands and dealers will need to continue to experiment with alternative methods like subscription-based buying. Meanwhile, marketing will have to work harder to convince people why it still makes sense to buy."
What actually happened: Things did not get any easier for automakers. Sales this year were only up by 0.4 percent through November and multiple automakers announced they're shedding sedan models to concentrate on SUVs and crossovers. But we might have overstated the rise of alternative buying methods. While some automakers, like Volvo, have found success with subscription-based buying, others setbacks, such as Cadillac, which is pausing its Book by Cadillac program.
My prediction for 2018: Pepsi works on its core
"Coke got the better of Pepsi in 2017 with its carbonated beverage sales off just 1 percent in the 52 weeks ending Nov. 4, compared with PepsiCo's 5.9 percent plummet, according to Nielsen data from Wells Fargo. PepsiCo CEO Indra Nooyi recently conceded too much media spending and shelf space was given to low-calorie smaller brands and not enough to Pepsi and Mtn Dew. So, look for PepsiCo to boost marketing behind its core soda brands. The marketer's Super Bowl ad plans could provide an early clue. The new efforts, though, might not be enough as consumers continue to gravitate to alternatives like bottled water."
What actually happened: Sure enough, PepsiCo dedicated two Super Bowl ads to its its core soda brands, Pepsi and Mtn Dew. But the marketing boost has yet to pay off in a significant way. PepsiCo's carbonated beverage sales fell 1.7 percent in the 52 weeks ending Dec. 1, compared with Coca-Cola's 2.7 percent sales increase, according to Wells Fargo. But, as we predicted, bottled water keeps blowing away soda, with category sales up 4.3 percent in that same period.
Adrianne Pasquarelli, reporter, retail and finance
My prediction for 2018: Amazon eats up (almost) everything
"After getting its private-label ducks in a row in 2017, the company looks ready to dominate with its in-house lines of grocery, fashion and recently launched activewear. It currently has dozens of private-label brands, with many more trademarks in the works. Watch out, brands. Bezos is coming for you."
What actually happened: While Amazon's private-label growth took a backseat to other headlines (the brand's dual second headquarter locations and advertising dominance) this year, the Seattle-based e-commerce giant still built up its own Amazon Basics products, which compete with brands selling on its site. Most notably, Amazon debuted its own pet product brand, Wag, earlier this year, and recently confirmed it will start selling its own toys.
My prediction for 2018: Infrastructure shakeout
"Retailers who have yet to align their brick-and-mortar and e-commerce operations, and can't afford to acquire a startup to help with the digital transition, may have a hard time modernizing their infrastructure. Target, for instance, with money in the bank, was able to pay $550 million for same-day delivery company Shipt. Expect those with debt to be left out in the cold when consumers open their wallets."
What actually happened: There was definitely a shakeout in 2018 that saw the flameouts of two major retailers, too saddled with debt to build up their ecommerce and delivery infrastructure. Toys R Us liquidated early in the year and Sears filed for bankruptcy protection as well; the latter's final fate will depend on its holiday liquidation sales and new loans. Meanwhile, the long-struggling J. Crew suffered multiple website outages during the crucial Cyber Monday shopping holiday. The brand is entering 2019 without a CEO or CMO.
Angela Doland, west coast editor
My prediction for 2018: The going in China gets rougher
"GroupM predicts healthy ad spending growth of 5.2 percent in the world's No. 2 ad market—but things aren't as easy as they used to be. The consumer goods sector and the mass-market car business are weak spots, plus multinational marketers and holding companies have increasing competition from smart and nimble local players. Big Western advertisers and agencies need to follow trends faster and experiment more in China's super-mobile digital culture, or they'll be left behind."
What acutally happened: China's ad spending was healthy in 2018, as predicted; GroupM even revised its forecast up, to 6.9 percent growth in 2018. But there were trade tensions even then, and I should have mentioned them. The trade war between the U.S. and China became one of the big stories of 2018, with its effects rippling across the business landscape and spooking multinationals. Apple just named it as one cause of slowing iPhone sales.
Jessica Wohl, food reporter
My prediction for 2018: Big food will need to watch its wallet
"To avoid being gobbled up, packaged-food makers with weak sales growth are buying faster-growth companies. Kellogg Co. already makes better-for-you snack bars, but paid $600 million for snack bar maker RXBar. Campbell Soup is spending more on Snyder's-Lance (its sixth acquisition in five years) than it has on any other deal. Hershey Co. is also digesting its biggest deal to date, for SkinnyPop maker Amplify. As pacts persist, especially with diminished corporate tax concerns, companies must make sure not to overspend."
What actually happened: The food industry stayed away from massive mega mergers, though a few deals carried multi-billion-dollar price tags. Among them: Conagra Brands forked over nearly $11 billion on Birds Eye and Duncan Hines maker Pinnacle Foods, confectioner Ferrero spent $2.8 billion on Nestle's U.S. candy business, and Mondelez International shelled out $500 million for Tate's Bake Shop (yes, those high-end cookies now come from the same company that makes Oreo and Chips Ahoy). Big food still wants to win in the better-for-you space. Kraft Heinz is spending about $200 million on condiment maker Primal Kitchen. Meanwhile, both Campbell Soup and Kellogg are eager to shed some lines, paving the way for more deals in 2019.
Prediction for 2018: Fast-food bargains with the devil
"Fast-food chains are kicking off 2018 with deals, from $1 items to $5 complete meals. That's great for diners, but does little to promote brand loyalty. Restaurants with food that people actually crave, and are willing to pay for, will come out ahead."
What actually happened: The biggest innovation in the value space might have been trying to get people to spend more than $5. McDonald's and Burger King each tried out $6 meals. But there are still plenty of items to be had for $1 across the sector. Heck, even Applebee's is busy advertising a rotating lineup of $1 alcoholic drinks. And with the way the economy is going (you might not want to look at your 401k statement without some antacid handy), cheap eats aren't going anywhere.
Megan Graham, agency reporter
My prediction for 2018: More value in media
In 2017, independent media agencies continued to scoop up big-name clients (like Horizon winning Sprint and Crossmedia taking on HomeAway). As clients deign to understand exactly where their dollars are going, more will turn to agencies that might not give them the cheapest rates, but can give them bang for their buck—and give them a CEO as their point of contact, instead of a lower-level account manager.
What acually happened: In the U.S., indie Horizon Media notched a No. 2 spot (behind Omnicom's OMD but ahead of Dentsu Aegis Network shop Carat and Publicis Media's Spark Foundry) for total projected billings in 2018, according to a recent report from Comvergence. Though indie shops had some high-profile wins (think Canvas taking Heineken or Horizon winning Burlington Coat Factory) — we're seeing many clients turn to holding company solutions where they can get creative, media, PR and other scopes of work in the same place.
Jack Neff, editor-at-large
My prediction for 2018: Do-it-yourself advertising
"Big advertisers buying small brands have learned that bootstrap operations don't put down big retainers for urban-based ad agencies with high overheads, but instead use low-cost influencers or in-house studios to turn out social media content. Expect more to do this themselves. (Johnson & Johnson, for instance, discovered the pleasing simplicity—and saving of expenses—of the in-house studio used by the Vogue International business it bought last year.) There are a growing number of options for hooking up big brands with middling or micro influencers, and more transparent marketplaces like Tongal and StudioNow where brands can find creative and production help for projects."
What actually happened: Certainly big advertisers kept doing production in house, with Unilever leading the way. Increasingly, they took handling of influencers in house rather than leaning on third-party intermediaries. But beyond that, they developed more in-house capabilities for creative, media planning and media buying. Procter & Gamble Co. for example, launched a North American Fabric Care agency made up rivals from Publicis Groupe, WPP and Omnicom, plus its own media-planning and buying operation, hiring its own employees in New York. P&G also launched a performance-marketing in-house shop for its oral and personal health-care business called 87Hundred.
My prediction for 2018: Big CPGs will go small
"Flush with cash—from the Trump tax cut and elsewhere—big packaged-goods companies will acquire small ones even faster in an effort to buy the growth they can't generate internally. They'll also invest more in internal innovation groups that give small teams relative autonomy to launch new brands. The reason: Smaller players are growing faster than bigger ones, and the big ones need to capture that energy in an investment market that increasingly values growth over profitability. ...but it won't help them. It's the math, stupid. Say a $40 billion company acquires or launches 10 $100 million brands growing an average of 20 percent annually. Best-case scenario, that adds just a half percentage point to growth. Plus, venture capital and buyout funds, also flush with cash, will turn to consumer goods startups amid doubts that tech startups can successfully compete against the Big Four (Google, Facebook, Amazon and Apple), which will drive up prices."
What actually happened: Yes, big CPG's kept buying small ones, such as P&G acquiring Walker & Co. and Unilever buying Equilibra. But the real trend was that the biggest began to develop a new business model, essentially functioning like their own venture-capital groups and incubators. P&G launched 140 seed-stage experiments on Indiegogo, including new brands such as D3, a line of wafer-size household cleaners and personal care products that can be transported easily and activated just by adding water. Unilever adopted its similar "Lean Like a Startup" system, which similarly emphasizes just getting products onto the market fast, often sold direct to consumer, then modifying from there. The companywide scale of these efforts could have a much bigger impact than piecemeal acquisitions.
Garett Sloane, tech, social reporter
My prediction for 2018: Facebook's down with OTT
"Facebook needs a hit show to get Watch off the ground, and needs to encourage more lean-back viewing, the kind where someone fires up the Facebook video feed and stays for longer sessions. Where better to get those kinds of viewers than from TV? Expect Facebook to make a bigger effort to get into over-the-top television, with a better app for digital streaming. Watch could even be spun off into its own app, and appear on devices like Roku, where Facebook has yet to make inroads. A Roku tie-up could be just what Facebook needs. But even better? Facebook buying Roku, which would give it instant credibility in digital TV."
What actually happened: Facebook certainly tried to get down with OTT, but mostly fell short. Facebook launched Watch in 2017 as a place to compete with YouTube on premium video from credible media partners. However in 2018 it failed to take Watch to the next level, to a platform where viewers would go to binge-watch videos, generate a super-size audience, and attract advertiser interest. Facebook also did not break into the OTT world with a fresh app that could run its new shows through devices like Roku. In fact, Facebook took a step back and shut down its attempts to build an ad network that could deliver commercials to apps on Roku and Amazon's Fire TV, because those platforms have made it difficult for Facebook to get the data it needs for a useful ad offering. That's why Facebook would have done well to buy Roku in 2018—alas, another failed prediction.
My prediction for 2018: YouTube stars collide
"The biggest threat to YouTube is its own stars. The video service couldn't get through one day in 2018 without another blowup about the content it allows to stream online: One of its top stars, Logan Paul, pulled a Pewdiepie and posted an offensive video that showed a person who'd committed suicide. Just the kind of video brands can't run from fast enough, and a continuation from the previous year's problems with bad videos. YouTube will distance itself from these unpredictable so-called stars and sign more steady, true celebrities to create on the site."
What actually happened: The Google-owned video service did exactly what we said it would. It distanced itself from unpredictable stars like Pewdiepie and Logan Paul. YouTube went for a more controlled approach to programming, promoting stars like Will Smith and creating critically-acclaimed shows like "Cobra Kai," a "Karate Kid" sequel. YouTube also started streaming feature-length Hollywood movies supported by advertising. This build-up of predictably high-quality video was a smart turn it seems, as YouTube was closing out the year with even more controversy from creators. Pewdiepie, who still has the most subscribers on YouTube, once again showed why he's vlogger non grata when he told fans to patronize a fellow YouTuber known for videos with anti-Semitic and far-right themes. In 2019, if Will Smith isn't enough to elevate the service, YouTube may have to just start running reruns of Mr. Rogers to bring some civility.
My prediction for 2018: Snapchat wins—or loses
"It's a make-or-break year for Snapchat, which will prove detractors wrong—or continue to bleed money. No longer the 'it' app, it has to prove why it belongs in the conversation with Facebook and Google. Its biggest threat, aside from Facebook and Instagram copying everything it does, is stagnating user growth and media companies—such as CNN, which just canceled an experimental show—running from the app instead of embracing it."
What actually happened: Unfortunately for Snapchat, we were right. 2018 was a make-or-break year for the company, and it mostly broke. Starting the year, Snapchat was already showing signs of slower user growth and it was no longer able to coast on its claim as the cool app for kids. In February, Snapchat's redesign took a toll on the company, with celebrity users like Kylie Jenner complaining about the new layout. That was just the beginning of its woes, and the app started shedding users, dropping from 191 million daily users at the start of the year to 186 million daily users at the end of the third quarter of 2018. CEO Evan Spiegel reshuffled the executive ranks to give it new leadership going into 2019. Snapchat's stock price was down about 60 percent by the end of the year; the company's total value was cut more than half to $7.5 billion.