GroupM Sees TV Spending Up 2.3%

Some digital spending returns, but measurement, streaming challenges persist
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TV advertising spending in the U.S. will show moderate growth in 2016, according to a new forecast by media buying giant GroupM.

GroupM sees TV spending up 2.3% to $76.6 billion after a flat performance in 2015. The gains are driven by national elections and the Olympics.

National TV spending will be up 1%-2%, with most gains coming from cable. Some money that had migrated from TV to digital will return to TV, the agency said. But TV continues to face challenges from shrinking audiences resulting from a lack of content measurement across platforms and growing competition from streaming video services like Netflix and Hulu.

GroupM sees an improved consumer outlook in the U.S. driven by a positive employment market and low inflation on non-discretionary goods.

“[The] media marketplace will continue to face fragmentation as consumers have more content choices and access driven by continued adaption to mobile and OTT devices. This provides opportunity for consumers to spend increased time with media but also allow more time shifting and more customized choice. The ability to measure audiences in this increasingly more complex environment using consistent metrics and methodology is presenting significant challenges,” GroupM said in its report. “This is affecting media allocation and valuation, which can upset spending trends as more sophisticated data applications and measurement metrics are utilized in media portfolio management.”

Overall U.S. ad spending is expected to increase 2.7% in 2016. Worldwide, GroupM sees ad spending rising 4.5% in 2016 to $51.9 billion. Six months ago, the company forecast at 4.8% gain.

“The outlook remains tough. Marketers’ constrained pricing power in a deflationary world, a macro trend, prompts ongoing focus on cost control versus investment and this colors our outlook,” said Adam Smith, GroupM’s futures director.

GroupM predicts 2015 will be the first year that absolute spend in traditional media went backwards in the new world—Latin America, Central & Eastern Europe, and Southeast Asia. Only a half-point drop is predicted, but this marks rapid deceleration from the 17% growth recorded as recently as 2010. New world newspaper advertising first went negative for growth in 2012, followed by magazines in 2013. China's advertiser exodus from TV to digital gave the extra push required to make 2015 a negative for traditional media in the new world. These trends are anticipated to ease slightly in 2016.

Across the globe, advertisers are looking at digital, and GroupM forecasts a 14% increase in digital spending that while large, represents a slowdown from the 17% growth in 2015.

“Facebook is addressable and targeted at scale with requisite tools and automation that make it easy for advertisers to understand and use; so it is reaping advertising growth of 50% globally, including Instagram," said Dominic Proctor, global president of GroupM. “Organic Google website revenue is growing remarkably fast too at 25.5%t, and they have streamlined YouTube into a complement to broadcaster VOD, even if it is not yet a real challenger on price or quality.”

“We see that digital’s data and automation capabilities are inspiring the evolution all media -- in all markets across the globe -- but digital will continue its powerful growth and market share gains. This is despite the challenges in the digital space such as viewability, fraud, measurement and currency, all of which we expect to be solved by market forces,” Proctor said.

(Photo via Ervins Strauhmanis's FlickrImage taken on Sept. 19, 2014 and used per Creative Commons 2.0 license. The photo was cropped to fit 3x4 aspect ratio.)

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