Political Spending May Stem the Tide, But Legacy Media Is Losing Its Grip

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borrell logoAfter a decade of upheaval, the media industry is on the brink of losing its hold on local marketing spending in the U.S.

Speaking at the Local Online Advertising Conference in New York on Monday, Gordon Borrell, CEO of Borrell Associates, said that legacy media’s share of local marketing spending will be cut in half over the next five years, declining from 52% in 2013 to a little over a quarter in 2018.

The shift is due in large part to the meteoric growth of local digital marketing spending, and the rise of non-media channels developed by the technology sector over the past decade. According to research from the Virginia-based firm, spending on local digital marketing is set to grow nearly 42% next year — the bulk of which will go to search, social media, marketing software, and other.

However, even as digital continues to undermine legacy media’s core businesses, a surge in political spending could buoy sagging revenues — albeit only for a brief period. The research firm predicts that political spending on marketing is set to balloon in the next four years, growing from 120 billion in 2012 to well over 950 billion in 2016. The overwhelming majority of that money will still be spent traditional media — namely, television —with only a fraction spent online.

During a presentation Monday morning, Michael Bassik, chief executive at WPP’s Proof Integrated  Communications, said a slower-to-adapt political advertising climate could benefit local media in the next few years, but the growth of direct marketing alternatives — namely, social media — could undercut local media providers in the long-run.

“Social is going to be the dominant advertising medium, and I think that’s going to be a threat to local publishers. “They’re already thinking that we can go to Google, Facebook, and Twitter for direct response. The targeting that only used to exist in the realm of direct mail now exists online.”

Social media came of age as as tool for political marketers in 2012, due in large part to targeting and data analytics innovations developed by the Obama campaign. Speaking at Street Fight’s Local Data Summit in Denver last week, Carol Davidsen, chief executive at Cir.cl and a former Obama for America staffer, described the role of social data in the campaign, saying that by pairing voter registration and social media data, she and her colleagues were able to circumvent expensive media channels like television.

Bassik believes that much of the innovation, which occurred in 2012, will become commonplace in 2016, leading to a big jump in the amount of money that political campaigns spend on social media messaging and analytics come the next general election. He said that nearly half of the money which political marketers are forecast to spend on digital in 2016 will be spent on Twitter, Facebook or the other properties or technologies that facilitate social media marketing.

Although social could undermine some of the direct response spending that has gone to legacy media firms, the continued demand for video — both in television and online — could provide a needed lift for local media companies. Bassik argues that the growth of video inventory on the web (and the lack of standardization around pricing) could provide a large growth area for local media companies as they look to sell digital inventory along with traditional products — namely, highly sought-after television spots.

One area where Bassik remains bearish is mobile. “Mobile was, and still is, a very questionable medium for most political advertisers,” he told the audience Monday. “They understand how banner ads work, and how social media works — but mobile remains elusive to political consulting community.”

The key for legacy local media companies, says Bassik, is to sell traditional and digital inventory along side of one another. There’s enormous demand for traditional formats like television, and media companies have an opportunity to translate the scarcity into a boom for their digital businesses.

However, the writing remains on the wall for local media firms. The organizational challenge is to make sure the promise of a short-term influx doesn’t artificially brighten an otherwise ominous prognosis and inhibit change.

Steven Jacobs is Street Fight’s deputy editor.