Local ad spending reached $137.9 billion in 2014, and will see a slight boost to $139.4 billion in 2015. We talked with BIA/Kelsey Chief Economist and SVP Mark Fratrik about the new research (interview below).

Every year, BIA/Kelsey issues a five-year forecast on local spending in the fall, and then updates it in the following spring based on full year reporting, current trends and anticipated events.

This year’s update shows more spending than originally forecast in 2014, and modest increases in our 2015 given several factors, including a rapid rise in mobile spending.

BIA/Kelsey: We’re seeing a slight uptick from our original forecasts for 2014-2015. What’s driving that?

Mark Fratrik: Local TV spending was stronger in 2014 than we predicted, primarily due to political advertising from many Senate, House and gubernatorial races. And television still drives local political spending, even though its overall growth rates are much lower than online. Television growth rates average 3-4 percent. Online growth is always in double digits, but starts at a much smaller base. To be sure, we aren’t downplaying the shift from traditional advertising to more digital/online/mobile outlets. These new media provide a more focused and efficient advertising vehicle for national and local advertisers to reach their audiences. The shift is especially felt in traditional print outlets, such as newspapers.

BIA/Kelsey: Hundreds of millions of dollars, if not billions, are being raised for the next presidential election. Won’t that drive spending with local television outlets?

Mark Fratrik: We should see an amazing amount of spending coming up in late 2015 into early 2016-15. With a tightly competitive Presidential race on the Republican side, it won’t just be in the early stats of Iowa, New Hampshire, Nevada and South Carolina. And we want to make the point again about online and digital. While political campaigns are increasingly using digital outlets, local TV and cable still see a much larger part of that spending. They’re an important part of that message building.

BIA/Kelsey: The big new local channel is mobile. We see how the Internet pure plays like Google, Facebook and Yahoo are reporting that mobile revenues are moving towards parity with other digital advertising.

Mark Fratrik: Mobile is driving most of the change in the digital space, gaining traction with advertisers, and jumping to an 11.5 percent share of the media pie by 2019 from 3.1 percent a year ago. We are constantly updating and increasing our estimates for mobile spending . By 2019, it will be the fourth highest channel for local media spending in terms of share. Mobile is also driving our increased forecast for social media spending, which will grow by almost 1/3, or 31 percent.

BIA/Kelsey: We’re seeing a lot of activity for digital audio services like Pandora, I Heart Radio and Spotify. How much will they impact local spending, and especially, traditional radio?

Mark Fratrik: Radio is a good illustration of the gap between digital and traditional media revenues. Take Pandora. It will generate nearly $153 million in 2014 in local advertising revenue, which represents really healthy growth. But that is just $153 million of $139 billion in local media spending. And it is only in the Top 50 markets. Conversely, Radio stations continuously to basically hold its own with $14.4 billion in over-the-air advertising spending in 2015, or 10.3 percent.

Chief Economist and SVP Mark Fratrik

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Television dominated the Government/Political/Religion (“GPR”) vertical in 2012, according to BIA/Kelsey’s Media Ad View Plus. In 2012, television’s $3.1 billion of advertising from GPR represented nearly 3/4 of total advertising for this vertical.

2012 Government/Political/Religion Ad Spending by Media

The $3.1 billion of GPR advertising represented 15% of the television media’s total ad spend in 2012, with the vast majority of it coming in the Fall (September to November), based on information from the Television Bureau of Advertising (TVB). TVB has studied the spending patterns in the political category for the past several election cycles. The vast majority of political spending occurs in the Fall (September to November), with the exception of primaries, which provide some advertising revenue from January to September, at least in markets within battleground states. “Clearly local TV’s role as the campaign media workhorse has not changed” states the TVB about the 2012 election season.

GPR advertising is cyclical, peaking during big national and local elections, which occur during even years. The more hotly contested the elections are, the better for local television stations. In 2017, an odd year with no major political elections, the GPR advertising landscape is vastly different, with only 19% of GPR advertising revenue going to television. More GPR advertising revenue will be going to direct mail than television in 2017, according to Media Ad View Plus. In odd years, such as 2017, GPR is dominated by smaller local elections, which rely more on direct mail to get their message to voters in their districts rather than advertise to entire television markets.

2017 Government/Political/Religion Ad Spending by Media

The bounty that can be GPR revenue during the even years is not equal across the 210 Nielsen television markets. Markets located in battleground states will see greater GPR advertising spend than markets in states that are heavily red or blue. States such as Ohio, Virginia and Florida have become predictable battlegrounds states. These so called “purple” states see boosts during even years, with the Presidential, Senate and House races.

More information on BIA/Kelsey’s Media Ad View Plus is available here.

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MerchantCircle.com released findings today from a survey that revealed 50 percent of small-business owners follow political candidates or related organizations on Facebook. Fourteen percent of respondents follow these groups on Twitter. The survey comprised more than 6,000 U.S. small-business owners. It’s surprising to learn that busy small-business owners prefer their political messages funneled through social media. This is a telling effect of the comfort shift from traditional to digital advertising among SMBs.

Television was the least informative marketing method with 40 percent of business owners tuning political ads out. Ironically, the bulk of campaign ad budgets are spent on television. Based on MerchantCircle’s results, social media appears to be three times as effective as television for political campaigns that are seeking to target small-business owners.

Printed materials, including direct mail political fliers, are also better received than television. Fifteen percent of respondents said they found these materials informative. With less than six months until the presidential election, these data come at a critical time. Digital media agencies are feverishly working with political groups to ramp up effective outreach strategies. If you want more political ad talk, read our Advisory on how traditional and digital media stack up in political advertising.

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