“The unprecedented growth in advertising spending in the first half (+32%) was more than low comps due to the COVID lockdown and recession last year,” Vincent Letang, Magna’s executive VP for global market intelligence, states in the report. “It was caused by a unique combination of national brands reconnecting with consumers and competing for a limited amount of traditional media inventory, while the lasting changes of COVID on lifestyles and marketing methods continue to fuel huge digital advertising spending from both big brands and small businesses.”
While consumer demand remains strong, brands are now contending with COVID-related supply issues, shipping cost increases and labor shortages that are prompting some marketers to curtail holiday ad spending plans, as Ad Age reported last week. The auto industry has been hard hit by a scarcity of microchips used in car parts that is forcing brands and dealers to re-evaluate ad spending on sales events, including holiday-themed promotions.
The supply situation is one reason Magna is projecting automotive spending will remain below pre-COVID levels in 2021, but the firm expects it to recover in 2022. “In the first half [of 2021] auto spending was quite dynamic but we suspect it is going to be more subdued in the second half. It will still grow year-over-year compared to the COVID year, but it will slow down,” Letang said in an interview.
But overall, Letang does not expect supply issues in other industries to result in a significant ad spending cutback. “In the big picture, I don’t think it’s going to dampen the recovery that much—only for some verticals and for the media formats that rely on those verticals,” he said.
Impact on local TV
He pointed to local TV as one sector that could be hurt by the auto pullback. But TV stations will also benefit from political spending related to midterm elections.
Local broadcast and cable TV spending is the only media sector that Magna projects will end 2021 with negative growth (down 4.7%). Total video spending—which includes digital video and OTT—is forecast to grow 11.4% in 2021, led by pure-play digital sellers (such as YouTube and Twitch) that are expected to surge by 45.8%.
The forecast acknowledges the complications brought by the spread of the delta variant. “However, the effectiveness of existing vaccines against variants suggests that local authorities and employers will continue to incentivize or mandate vaccination rather than implement new restrictions to business and mobility that would hamper economic recovery,” states the report.
That gives Magna the confidence to project a rebound in ad spending in industries that have been particularly hard hit by COVID. The report estimates “triple-digit growth for travel and entertainment in the second half as Americans start traveling again and delayed blockbusters are released in movie theaters.”
As for more lockdowns, “if it hasn’t happened by now I don't think it is likely to happen,” Letang says. “In this scenario, we assume there will be no further COVID disruptions to consumer mobility, consumption and business in 2022 at all.”
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