Dive Brief:

• Pivotal Research Group analyst Brian Wieser released a Q2 update on the U.S. ad market that found digital advertising drove a 5% expansion even though TV was down 1% and there were double digit declines from other major media such as print, per MediaPost. Wieser wrote in the report that there is “mass market weakness” and the U.S. ad market in 2017 is on track for 4% to 5% growth.
• Making clear the full impact of digital spending, the growth rate for digitally-oriented media owners was 20% for the quarter, and ten large tech firms including Amazon, Google and Expedia increased marketing and advertising spending by a median growth rate of 24% in Q2, as reported by The Wall Street Journal. The report noted that big spenders like Google and Amazon are also digital ad platforms taking in the revenue from that increased spending.
• Looking to the future, Wieser sees digital growth eventually cooling off with growth of U.S. ad revenue falling into the low teens, and then single high digits within several years.

Dive Insight:

Digital spending passed TV late last year for the first time, largely based on the dramatic increase in mobile ad spending. So far this year, there have been some signs of weakness in digital in the face of issues like brand safety and a lack of transparency. However, the Pivotal Research Group report highlights the strength of the trend toward digital and the challenges facing the long-time king of the advertising hill, linear TV.

The Wall Street Journal's report is interesting because it suggests there could be a shift in the list of big spenders in advertising as digital continues to grow. Internet-based companies like Amazon, Google, Expedia and others drove growth in spending in Q2 while mass market advertisers, the traditional big spenders, have been focused on optimizing their ad spending this year. It is too soon to know if these shifts are temporary or if P&G, Unilever and other mass market advertisers will increase their investments as the major digital ad platforms start to address advertisers' concerns. 

While digital spending is definitely on a positive trajectory, not every industry group has been as down on TV as the Pivotal Research report. In July, eMarketer predicted a robust 65.8% increase in spending for targeted TV ads this year although the ads remain a tiny portion of overall TV spending at 1.7%, which is why any meaningful increase in the relatively new format creates a dramatic lift in percentage. Also last month, Jefferies & Co estimated that prime-time TV ad spending would be up 3% over 2016.

One challenge for TV is ratings are on a steady decline as more viewers, especially younger demographics, are becoming cord cutters as well as being willing to watch TV content on screens other than TV sets. Along with falling ratings, advertisers are increasingly balking at paying high prices for TV spots when they can find a desired audience with digital video advertising.