Ask anyone in Ohio what they’re least excited for during the home stretch of this year’s Election season, and I bet you they’ll say the non-stop television, print, and online advertisements from Obama, Romney, and other Ohio politicians trying to win the battleground state. At the Democratic National Convention in August, the crowd cheered and laughed when Obama said he was even tired of saying, “I’m Barack Obama and I approve this message.” Election season always means a surging tidal wave of political advertising. The 2012 elections are expected to break records for ad spend – after the 2008 elections hit a new record as well. According to Kantar CMAG, the United States will see 43,000 political spots a day until Election Day. We know what all of this means for the average American voter preparing to go to the polls, but what does it mean for the advertising industry?
The Way I See It
- I see a surge of revenue for local television stations, especially in battleground states, and online ad networks with spots from politicians and campaigns, as well as business groups, interest groups, and think tanks.
- I see a promising surge in activity for the advertising industry that should have a positive overall impact on advertising spending – perhaps enough for the rumored recession ahead to be postponed.
- I see an election season that may spell change for the future of political advertising and advertising in general – with a potential shift from traditional, local TV spots commandeering political ad spend to more innovative online, social media, and mobile advertising claiming more of the ad dollars. What has a greater impact on voters?
The Way the Industry Sees It
I sat down with Steve Farella, the founder and CEO of TargetCast, to pick his brain on this year’s political ad spend and what it means for the advertising industry as a whole.
Kantar CMAG projected the total spending on local spot TV advertising in the 2012 elections will be at $3 billion. What impact will that have on the advertising market as a whole?
At this point in the race, the largest ad spends are anticipated to be in those states that are still considered “swing states” where it is unclear whether they ultimately join with other blue or red states in the election. Those states currently include: New Hampshire, Ohio, Virginia, North Carolina, Florida, Wisconsin, Iowa, Nevada, and Colorado. Generally we see little national advertising and it tends to have only slight or no impact on national broadcast. Most agencies work with their clients to plan their local scheduling and daypart utilization so that, where possible, they side-step the heaviest pre-election weeks based on the clients’ needs. Primetime garners 23% of campaign spend, while combined News dayparts gets 32%. Early Morning saw significant growth between 2008 and 2010 and we expect that trend to continue. Access and Early Fringe also see activity while Late Night, Daytime, and Weekend see less.
In 2008, spending on political ads hit a new record. How does 2012 spending and overall advertising compare with the last election?
The explosion of Super Pacs – 501 (c)(4) organizations, trade associations with political arms – are the biggest development in 2012. For example, advertising weight in the market of Columbus, Ohio for the week of 8/15-8/22 reached 1,842 presidential race spots as compared to 832 spots in 2008. Las Vegas saw its presidential spot count go from 925 in 2008 to a record 2,870 in 2012. Wells Fargo analyst Marci Ryvicker has raised political advertising estimates from $4.9 billion to $5.2 billion by Election Night. So far, presidential candidates have spent more than seven times the amount of money spent in 2008 on digital ads (up from $22MM to $159MM). Online ad spending has doubled as a percentage of campaigns’ budgets over the same time period. Thus far, online ad dollars have mostly focused on emails, display ads, sponsored search terms, and audio and video ads.
Beyond TV, did any platform break through this year – social media, mobile/apps, online, etc. – that characterized political advertising in this election cycle? If so, how will this define future political advertising – and advertising in general?
While increases in spending happened across all online channels, email showed the largest % growth in spending – jumping 5,833% from 2008 spend levels. Also of note was the significant jump in online audio and video spend (+1150% and +588% respectively) – these increases will have the biggest impact long term as more and more people become increasingly accustomed to consuming TV and Radio – on multiple devices. As an aside, politicians are not taking advantage of paid media opportunities in the social space. For the most part, candidates are capitalizing on their fan bases and relying on organic growth. Having said that, Obama – in part because of his early usage/adoption of online media as a viable communications and advertising platform – enjoys a considerable advantage in this space ranging from 2x – 38x more followers and subscribers across Twitter, YouTube, and Google+ than Romney.
A new ruling by the FCC will require broadcasters in the 50 largest markets to make public which political groups they have sold ads to, and what was charged for each. What impact will this have on traditional political advertising and revenue for media firms?
Truthfully, this year, this appears to have had no impact. Once the political window opens, these political teams head into the marketplace to secure the “LUR” (lowest unit rate) for their candidates for the stations and dayparts that they feel will deliver their voting audience. Most regular advertisers are not in the market for “LUR” rates as these are highly unpredictable in terms of run rate. While there could be a curiosity to what a politician has paid, it is not a guidepost in the marketplace. The opposing candidate’s media teams may be interested in this information but even for them, their rates once past the initial window are dependent on timing as well as their requirements in the market. Lastly, this database is difficult to access and use for real time information. As time passes, if it becomes more user friendly and more reliable, then perhaps it will have some impact on the future marketplace.
What impact will political ad spend have for media sales in 2013? There is chatter in the industry that we have a recession ahead for advertising spending – will the massive election spending have any impact (positive or negative) on this?
With a hint of the idea of a recession, overall ad spending may be down. However, markets such as New York will be undergoing a strong political year in 2013 as the governor, mayor, and local borough political positions will all be up for grabs in the same year.
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