TVN’S FRONT OFFICE BY MARY COLLINS

Collins | Suiting Up For Political Ad Season

Just as a Super Bowl ad offers added value to advertisers, so too will political campaigns bring added value to media companies. Enjoy the uptick in revenues, but pay attention to the potential downside.

With the Super Bowl just over a week away, we are getting reports about that other viewership draw — the advertising between the plays. Have you seen the Hyundai commercial teaser in which Saturday Night Live alum Rachel Dratch tries to teach former Boston Red Sox player David Ortiz to speak with a Boston accent? It had me laughing.

This year’s big game spot line-up promises more than beer, cars, and technology. Two presidential candidates have already announced spending $10 million each on in-game advertising. Now, as NBC reports, other advertisers are voicing concerns about how this might affect their brand messages.

By all reports, 2020 is going to be a big year for campaign marketing. According to a recent report from Advertising Analytics and Cross Screen Media, “political ad spending has grown an average of 27% per year since 2012.” This is not only due to Super PAC (political action committee) monies in the wake of the Citizen’s United decision; candidate spending is also on the rise.

This is good news, and bad news, for media companies. Yes, there is the promise of increased revenue. However, that revenue opportunity will require planning and executing strategies to leverage all existing assets, to maintain and service established customer bases, and to tap into unique offerings that distinguish the company from the relatively new digital entrants into the space including Facebook, Google, and others.

BIA Advisory Services’ “Local Market Political Ad Spend Forecast for 2020,” released last August, estimates $6.55 billion will be spent in local political advertising in 2020. According to a press release from the firm, they forecast over-the-air television to take the majority of the ad spend (47%) at $3.08 billion. Another $1.37 billion (21%) will go to online/digital outlets, multichannel video programming distributors (MVPDs) are predicted to take in $919 million (14%), radio’s share should be just over $312 million (about 5%), with the balance going to other media.

Mark Fratrik, BIA’s senior vice president and chief economist, brought some clarity to these numbers in his article for MFM’s member magazine The Financial Manager (TFM). His piece, titled “Riding the Wave,” appears in the January/February 2020 issue.

BRAND CONNECTIONS

He points out that local revenue will be generated not just as part of the presidential race, but also from federal, state and local campaigns all across the country. The more hotly contested the race, the higher the projected ad spend.

The first contests, the Iowa caucus and the New Hampshire primary, get a lot of attention because they are first. However, this year changes to the primary schedule mean more states will be part of the nominating process earlier, among them California and Texas. Fratrik says that will translate to historic levels of spending in those areas.

Media Spending By The Numbers

Mobile and online advertising have been growing across all sectors and they are expected to grab more political spending than in previous election cycles. But, as Fratrik says, “traditional media will continue to see noticeable spending.” BIA estimates that the majority of the dollars will go to television stations and their online advertising platforms.

Local cable advertising, estimated as the second largest share, is predicted to take 13.9% of the political ad dollar pie. Online advertising not sold by traditional media players, which includes Google, Facebook and many other popular online sites, is projected as the third largest category; it should pull in 12.1% of the total spending, or about $793,000.

Mobile, while still comparatively small, is anticipated to generate a spend of $195,000. As Fratrik explains, the online sector has benefited from new requirements for national Democratic Party debate participation, which include minimum numbers of donors and dollars. To achieve those goals, campaigns are turning to digital/online sites, thus increasing their spending on these platforms.

Fratrik sees this shift to mobile as an opportunity for traditional media outlets, which can “tap into that spending by selling access to their own online, mobile sites, and apps.” Sales reps’ experience in selling these to their non-political clients means they have the expertise to help campaigns navigate spending on the platforms.

As he says, the appeal of online and mobile advertising is the ability to target different types of consumers and geographic regions, which allows political campaigns to more accurately tailor their messages. This is particularly important when campaigns are looking to reach “younger demographics who generally do not access local traditional media outlets as frequently as older groups.”

Political campaigns are like all advertisers in one respect, they need an advertising mix that includes not only targeted messaging but also messaging that is broader in scope. For campaigns, that could be a “get out the vote” message. Traditional media excels here because it provides mass audiences at specific times.

Over-the-top (OTT), or streaming, has been a frequent topic in these columns; it’s also set to play a much larger role in this election cycle. According to Fratrik, BIA expects OTT to attract $51 million in local revenue, despite most OTT platforms being national.

OTT’s value is in its ability to target audiences, both geographically and demographically. Businesses are already using it to target their messages to specific geographic areas, an advantage that’s also attractive to political campaigns.

State Implications

For media companies in Maine, Nevada, Arizona, Kentucky, North Carolina and nine other states, BIA projects that the levels of political advertising will be nearly overwhelming. In these highly competitive markets, the predicted total political advertising revenue will be one-third or more of all local TV OTT advertising.

Local cable systems and other media outlets in these markets will also see remarkable levels of spending. This is driven, in part, by the Democratic Party’s focus on gaining control of the Senate. Spending is anticipated not only from the campaigns themselves, but also from third-party efforts. The PACs referenced at the beginning of this article come into play here.

Total political advertising dollars will be larger than that in 2016, which according to many political analysts was an anomaly driven in a large part by one candidate’s outsize share of free media coverage.

Honor Thy Long-Term Advertisers

Fratrik points out that one of the downsides of the political advertising windfall is the problem of finding ways to serve established advertisers. Providing equal access for all of the political candidates is another. He says this “crowding out” can affect relationships with long-term clients and present an opportunity for them to drift to other advertising platforms. The question is, “What if those advertisers see better returns to their advertising spending on other platforms?”

There are ways to minimize the impact of this crowding out, especially in markets where considerable political advertising is expected. Important among these tactics is having sales teams work with significant core clients to schedule their year-long advertising in ways that will avoid the congested political season. Fratrik suggests having them increase their spending immediately before and after political seasons, which allows them to retain their presence while not becoming lost in the avalanche of political messages.

Watch Pricing — Lowest Unit Rates Ahead

Media companies must consider their pricing for all of 2020. This is especially true for radio and television stations, which need to consider the effect added demand for inventory could have on pricing. In addition, because stations are legally bound to offer the lowest unit rate to federal candidates and other qualified candidates during defined political windows, planning is imperative.

Fratrik’s final advice for media companies is to stay in direct contact with all of the major campaigns, providing them with as much information as possible about what is available. Companies operating in areas projected to have windfall campaign spending should also look for ways to free up as much inventory as possible while still servicing long-term clients.

Just as a Super Bowl ad offers added value to advertisers, so too will political campaigns bring added value to media companies. Enjoy the uptick in revenues, but pay attention to the potential downside.

The 2020 political advertising outlook is one of the topics on the agenda for MFM’s upcoming CFO Summit in Fort Lauderdale, Fla. With the Summit scheduled for the Thursday and Friday immediately following Super Tuesday primary contests — March 5-6 — there will certainly be a lot to cover. Information about the complete program and registration details are available on the MFM website:  www.mediafinance.org.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Facebook, Instagram and Twitter accounts.


Comments (0)

Leave a Reply


More News