U.S. Measured Ad Expenditures Declined 3.9% In Q3 2015 To $36 Billion

Out-of-home, Spanish-language TV and Paid Search show growth; Network TV flat due to impact from NFL scheduling

New York, NY, December 16, 2015 – U.S. advertising expenditures declined 3.9 percent in the third quarter of 2015 to $36.4 billion, according to data released today by Kantar Media, the leading provider of strategic advertising and marketing information. During the first nine months of 2015, measured ad spending fell by 4.0 percent. These results do not include mobile and online video advertising, categories where historical data for comparison are not yet available; our analysis indicates these channels are growing rapidly at the expense of other forms of media.

Media Platform Ad Spending in Q3

Sixteen of the 22 individual media types monitored by Kantar Media had lower ad spending in the third quarter. Among Television platforms, Spanish Language TV expenditures rose 1.1 percent and was the only segment in the category that showed an increase in Q3. The gains were driven by a sharp increase in ad time aired by Hispanic broadcast networks, offset by a slight reduction in average unit pricing.

Network TV spending was down 1.0 percent in the quarter. There was one less weekend of NFL games in September 2015 as compared to last year, which affects comparisons. Without this timing quirk, Network TV expenditures would have been up 3 to 4 percent.

Ad spending in cable TV declined 4.2 percent and a main component was continuing spend cutbacks by consumer package goods advertisers, a segment that typically accounts for about one-fifth of cable ad dollars. Although approximately the same number of CPG brands have continued to make use of the cable platform, a rising share have been purchasing less commercial time.

Spot TV ad expenditures were 5.2 percent lower in Q3. Strong spending by medical services, legal services and housing-related marketers were more than cancelled out by a steep year-over-year decline in political advertising due to the absence of federal elections.

Ad spending for Paid Search, which reflects text ads delivered to desktop PCs and tablets, grew 3.7 percent. Major categories with significant increases included travel, media and auto dealers. Paid Search budgets from the Education category, most notably by for-profit universities and vocational schools, fell for the third straight quarter. Growing scrutiny of student loan practices has threatened enrollment levels and the financial model of these institutions. Subsequently, this has impacted marketing. Paid search budgets, which are a big piece of the media mix, are thus being affected.

Online Display expenditures, which do not include video or mobile ad formats, declined 12.2 percent in Q3. Reduced page traffic across our monitoring universe of PC websites, which may be a reflection of audiences moving to mobile platforms, was a contributing factor. Financial service, telecom and insurance spending were sharply lower.

Among Radio platforms, Local Radio ad spending in Q3 was up 12.8 percent within the 36 markets monitored by Kantar Media. (Our local radio footprint size may affect direct comparisons with industry association estimates of radio industry ad revenue that are based on the entire country.) Higher spending from auto dealers, restaurants and telecom helped drive the gains.

Outdoor advertising was another pocket of strength with expenditures rising 4.0 percent. Digital billboard spending is still growing at an above average rate and transit ad formats also performed strongly.

Ad expenditures in magazine platforms continued to fall. Consumer Magazines declined 5.4 percent, characterized by weaker spending from cosmetics, hair care and prescription drug marketers. Sunday Magazines dropped 30.7 percent. Two-thirds of the lost dollars in Q3 were attributable to the closure of USA Weekend, which ceased publication at the end of 2014.

Local Newspaper ad expenditures fell 12.9 percent, following declines in the volume of ad space. There were large reductions from Auto Dealers and Retailers, two categories that have been aggressively shifting budgets into digital media. Real Estate also shrank at a double-digit rate as category advertisers moved budgets to online media and television.

Category Ad Spending In Q3

Expenditures for the ten largest categories declined 3.4 percent in the third quarter of 2015 to $19,373 million.

Retail Category

Retail was the largest category in Q3 with measured expenditures of $4,041 million, a decline of 5.2 percent versus last year. Retail advertising has now contracted for five consecutive quarters, a consistent pattern that has continued into the autumn.

Media expenditures from Department Stores, which include the mass merchandise discounters, dropped 20 percent in Q3 while Consumer Electronics stores plummeted 30 percent. Shoppers have curtailed their spending in both segments, putting pressure on marketing and advertising programs.

Tempering these severe losses were healthy increases from retail businesses that are closely tied to the housing industry. These include bedding and mattress stores (+20%), home furnishing merchants (+11%) and furniture stores (+8%). Housing sales are a major stimulus for consumer spending in these areas, which in turn helps stimulate ad spending. Monthly home sales have been increasing year-over-year throughout 2015 and retailers’ media budgets have followed.

Apparel retailers were also a bright spot in Q3 with ad expenditures increasing more than 4 percent.

Automotive Category

Automotive was the second largest category by dollar volume. Q3 expenditures finished at $3,485 million dollars, 1.2 percent lower than a year ago. Manufacturers spending rose 1.7 percent while dealer investments declined 4.9 percent. Third quarter is the end of the industry’s model year cycle, and during the period ad messaging predictably shifted to promote sales clearance events.

2015 sales of light trucks have been exceptionally robust – up more than 12 percent through November according to Autodata Corp – and manufacturers have been shifting budgets to promote their CUV, SUV and pickup truck models. This trend accelerated in Q3 and light trucks accounted for 52 percent of manufacturer’s total ad spending compared to a 38 percent share in the year ago period. The last full year when trucks received a majority of manufacturer’s ad spending was 2008. Marketing launches for the Ford Edge, Ford Explorer and Hyundai Tucson boosted truck spending in the quarter.

On the retail side of the auto business, measured ad expenditures by dealer groups were flat while spending from individual dealerships dropped 4.9 percent. Given the health of auto sales and the competition for market share, it may seem surprising that dealers reduced ad budgets. However, industry reports indicate that unmeasured local digital media are getting a bigger chunk of dealer marketing dollars, leaving less money for other media platforms and contributing to the measured declines.

Pharmaceutical Category

Pharmaceutical expenditures increased 18.0 percent to $1,343 million in Q3. The gain occurs against the backdrop of a recent recommendation by the AMA for a ban on direct-to-consumer advertising of prescription drugs.

After bottoming out in 2012 at $3.9 billion, pharma ad spending is pacing at around $5.6 billion in 2015, an all-time high. A primary contributor to the uplift has been a spike in the number of well-funded marketing launches for drug brands.

As we have noted in prior reports, magazines and national television are the favored media platforms for pharmaceutical advertisers, but expenditures are extremely concentrated in the hands of a few media properties. In Q3, ten networks accounted for a 71 percent share of pharmaceutical spending placed on cable and broadcast TV. Nine magazines accounted for a 52 percent share of all expenditures in that platform.

Restaurant Category

Ad expenditures for Restaurants decreased 1.1 percent in Q3 to $1,553 million. For the quick-service segment, which accounts for more than one-half of category spending, total investments dropped 2.5 percent and were impacted by large cutbacks from McDonalds and Subway.

Pizza restaurant spending was up 1.5 percent, aided by a celebrity-focused campaign from Domino’s discussing new ways of online ordering, and higher expenditures from Little Caesar’s to promote new menu items.

Spending by casual dining restaurants also rose 1.5 percent compared to the year ago period. Among the top chains there were noteworthy increases from Denny’s (+46%) and IHOP (+25%). The two brands are direct competitors and their specialty is breakfast foods served in a fast casual environment. Their amplified marketing support appears to be a reaction to higher breakfast spending from several QSR chains and the anticipation of McDonald’s launch of an all-day breakfast menu, which was announced at the start of October.

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About Kantar Media

Kantar Media is a global leader in media intelligence, providing clients with the data they need to make informed decisions on all aspects of media measurement, monitoring and selection. Part of Kantar, the data investment management arm of WPP, Kantar Media provides the most comprehensive and accurate intelligence on media consumption, performance and value.
To find out more, please visit us at www.KantarMedia.com.

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