A strong economy, an early start to the 2020 election cycle and increases in mobile and social advertising have led BIA Advisory Services to raise their local ad spending forecast. The media research firm now calls for the total 2019 local media marketplace to be “slightly stronger” than it first expected earlier in the year, with ad revenue climbing to about $148.8 billion.
The updated forecast has radio among the top five local media channels used by advertisers. Radio is expected to cordon off 9.8% of the local ad pie this year, or roughly $14.5 billion. BIA chief economist Mark Fratrik tells Inside Radio the overall outlook for radio remains the same, with a modest 1% drop in over the air radio offset by high single-digit gains for online radio.
“Competition for audiences continues to erode over-the-air advertising revenue, however online efforts by stations are helping to support a slight growth in overall revenue,” BIA said in the updated forecast released today (July 9).
Despite rapid growth in mobile ad spending, traditional media will book six of every 10 dollars spent on local advertising this year, totaling $89.2 billion. Digital ad revenue is expected to clock in at $59.5 billion or about 40% of the total.
However, the future of online/digital advertising revenue is “progressively increasing,” BIA says, with a 2018-2023 compound annual growth rate (CAGR) of 9%. Over the same period, traditional ad revenues will see a 1.4% CAGR decrease.
Fratrik calls 2019 “a very interesting time for local media.” Despite being a non-election year, he points to earlier than usual political ad spend across television and mobile/social channels, due to a field brimming with Democratic candidates running for the White House and all the attention the presidential race is garnering. In addition, BIA is “more bullish” on some digital ad platforms like mobile “due to its targetability, measurability, attribution and high level of adoption by consumers.”
Here’s how BIA breaks down the Top 5 local media channels in 2019:
Direct Mail: $37.2 billion (25% share) Encompasses direct solicitation, couponing and catalogs, and takes into account the cost of the full delivery, including materials and postage, unlike digital that typically has a lower production cost.
Local Video: $29.5 billion (19.9% share) Includes local over-the-air TV, local cable, local online video, out-of-home video and mobile video. This sector is “becoming very competitive,” BIA says, due to pressure from online, out-of-home and mobile video. Still TV remains dominant even without substantial political advertising in 2019.
Mobile: $21.8 billion (14.6% share) Mobile is “growing rapidly on all fronts,” per the forecast, with the mobile social ad segment contributing the most growth. A big chunk of these local dollars are being driven by national advertisers.
Desktop/Laptop/Tablet (Online/Interactive): $20.2 billion (13.6% share) This channel continues to become more important to advertisers with spending increasing across all online segments. “Desktop video and desktop search are driving growth and increasing at a double-digit CAGR.”
Local Radio: $14.5 billion (9.8% share) Even as competition for audiences continues to erode over-the-air ad dollars, online efforts by radio stations “are helping to support a slight growth in overall revenue,” BIA observes.
While seeing direct mail perched at the top of the list may be a head-scratcher, Fratrik maintains that it remains “an important medium” because it “directly targets more households than any other channel and mobilizes local consumers to make purchases.”
And despite the temptation for companies to simply aim for a larger share of the dollars spent in their specific media sector, Fratrik offers an alternate path to growth. “The key for revenue growth (and protection) today is not just to look at the media in your sector, but across all local media because you compete across all ad channels today,” he advises.