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US ad spend up 5.7% in Q1 2014 due to Winter Olympics

MUMBAI: Total ad expenditure in the US increased 5.7 per cent in the first quarter of 2014 to $34.9 billion, according to data released by Kantar Media, a provider of strategic advertising and marketing information.

Kantar Media North America chief research officer Jon Swallen said, “The Winter Olympics delivered its expected windfall in the first quarter, adding about $600 million of incremental ad spending to the marketplace. But the nature of the event is that this money is narrowly distributed and doesn’t benefit all sectors of the market. Subtracting the Olympics’ contribution, the growth rate for remaining expenditures was just under four per cent.”

Measured ad spending by media – The Winter Olympics effect: Every measured type of television had expenditure increases in Q1. Network TV increased by 14.5 per cent with about one-half of this growth coming from the Winter Olympics. Higher spending on the NFL playoffs and Super Bowl also contributed to the gains.

The Olympics also gave a boost to Spot TV expenditures which rose by seven per cent during Q1. In addition, an early rush of political spending for key races in Alaska, North Carolina and Texas were a reminder that as November elections draw closer, political money will increasingly define and drive the spot TV marketplace.

Cable TV expenditures increased by 6.2 per cent in Q1 on higher spending from a broad range of core categories. Spanish-language TV rose 18.0 per cent in the period, primarily from gains at broadcast networks. Syndication TV spending was up 3.2 per cent and received a hefty boost from pharmaceutical, insurance and restaurant marketers.

Internet display expenditures grew by 13 per cent in the first quarter as financial, retail and insurance marketers raised their budgets. Outdoor media registered a 2.8 per cent increase on stronger spending within the local service and retail categories.

However, spending in print publications continued to retreat in Q1. Consumer magazine print expenditures fell by two per cent and the key metric of ad pages declined more than five per cent.

The bottom line totals were skewed by severe reductions from the two largest magazine advertisers (Procter & Gamble and L’Oreal), who account for more than ten per cent of total spending. Across the industry, the number of continuing magazine advertisers that lifted spending outpaced declines by a 3:2 ratio. Ad expenditures in Sunday magazines dropped 5.6 per cent on weaker spending from pharmaceutical, financial and travel marketers.

Local newspaper advertising decreased by 5.8 per cent in Q1 on commensurate declines in ad space and continuing cutbacks by local auto dealers and retailers. National newspapers finished the period with spending unchanged compared to a year ago.

Results for radio media were mixed. National spot radio was up by 6.7 per cent and this was driven by a larger number of brands using the medium. Local radio, which reflects English-language stations, had a spending decline of 4.7 per cent and Hispanic local radio stations were down by 10.8 per cent. Both of these segments were hit by lower spending from the retail, auto dealer and restaurant categories.

Measured ad spending by advertiser – Double-digit growth abounds: Spending from the ten largest advertisers in the first quarter of 2014 was $4.37 billion, a 14.1 per cent increase and an aggregate gain of $540 million versus last year. Television media spending accounted for more than 80 per cent of this growth and was closely associated with the Winter Olympics. Six of the top ten marketers (P&G, GM, AT&T, Comcast, Pfizer and Berkshire Hathaway) had significant TV ad buys in the event.

P&G secured the top-ranked position for Q1 with $773.8 million of ad spending, down by 2.6 per cent from the prior year. Increased support for personal care and paper product brands was more than offset by reductions within its cosmetics and hair care brand portfolios.

General Motors had the largest year-on-year growth among the top 10 as it lifted ad spending 55.8 per cent to $593.4 million. Amidst an expanding product recall, GM ad messaging remained focused on its current vehicle line-up with extra support allocated to newly redesigned versions of the Cadillac CTS, Chevy Silverado and GMC Sierra.

Two other auto manufacturers also had big spending increases that were driven by marketing launches for redesigned models. Ad expenditures from Fiat Spa rose by 38.8 per cent to $340.9 million and Toyota Motor was up by 17.7 per cent to $315.6 million.

Verizon Communications raised its ad spending by 24.8 per cent in Q1 to $370.8 million as the company completed its buyout of Vodafone’s ownership stake and refocused its attention on marketing requirements for its wireless and broadband services. Rival AT&T increased spending by 4.9 per cent to $535.5 million as it rolled out a new umbrella campaign with the tagline, ‘Building you a better network’.

Pfizer spent $354.9 million in Q1, up by 33.6 per cent from the prior year. The company aggressively boosted ad support for the prescription drug Celebrex in advance of a May 2014 patent expiration which opens the door to sales competition from generic alternatives.

Berkshire Hathaway ad spending rose 20.7 per cent to $329.8 million in the first quarter, primarily attributable to the GEICO insurance subsidiary.

Measured ad spending by category: Expenditures for the ten largest advertising categories grew by 6.1 per cent in Q1 to $22,061.3 million. Nine of the ten had spending increases.

Automotive was the top category with $3.75 billion of spending, up by 7.7 per cent. Auto advertising continues to be propelled by a strong sales climate for new vehicles and a steady stream of model introductions and redesigns that trigger larger ad budgets.

Retail was the second largest category in Q1 with expenditures of $3.41 billion, an increase of 1.6 per cent. Strong spending from home furnishing retailers was cancelled out by steep reductions from the clothing, jewelry and food store segments.

Insurance had the largest increase among the top ten categories as expenditures rose 30.8 per cent to $1.61 billion. Fierce competition among auto insurers as well as a surge of advertising for health care coverage leading up to a key Obamacare enrollment deadline was responsible for the increase.

Spending from the food and candy category was up by 6.4 per cent to $1.7 billion. Several well-funded product introductions by candy manufacturers and the ongoing marketing battle among leading yogurt brands were the primary growth drivers.

Local services expenditures grew by 7.1 per cent to $2.36 billion. A key segment within this category is hospitals, medical center and clinics. These advertisers significantly boosted Q1 spending in the expectation that many people gaining health care insurance under the Affordable Care Act will be in the market for medical tests and procedures.

Financial services advertising increased by 4.2 per cent in Q1 to $1,981.1 million. Banking companies are facing tougher regulatory capital requirements and lifted their ad spending in an effort to win more consumer deposits. Financial management and advisory services were also active with campaigns that tapped into investors’ uncertainty about the security of their nest eggs.