Total 2023 Revenue Expectations Had a Slight Drop
The headline from the BIA report is the revision in total local spend, dropping to $161.7 billion from an initial projection of $165.7 billion. The good news is that this number is still greater than 2019 revenue by $13 billion when excluding political.
So, why the decrease? BIA analysts provided context during their June webinar, citing these drivers.
Digital is the primary area that’s declining. It’s in response to Meta and Alphabet (Google) lowering their expectations.
Economic trends are affecting local ad spending. Economic uncertainty is a player in every projection. There are both positives and negatives, including:
- Unemployment remains low, with 17 states hitting all-time records, and job creation has been substantial and steady throughout 2023. (Positive)
- Inflation is cooling. (Positive)
- Consumer confidence keeps rising. (Positive)
- GDP (gross domestic product) has experienced increases in Q1 and Q2 of 2023. (Positive)
- Interest rates are still high but likely not moving up or down anytime soon (negative), which impacts the cost of borrowing money for mortgages and other large loans. (Negative)
- Wages aren’t keeping up with inflation. (Negative)
- The wealth gap is widening. (Negative)
The economy is something to watch, but localize your view on this. National trends don’t always align with local ones. Additionally, new business applications are seeing positive increases, with many considered high propensity. This describes new companies entering the market that have a favorable outlook for success, as rated by the Census Bureau.
Next, we’ll look at how organizations are spending on local advertising.
Where Are Local Advertising Dollars Going?
The gap between traditional and digital spending is closing. Traditional will receive 52%, while digital is at 48%. These categories represent the highest investments:
- Direct mail: $37 billion
- Broadcast TV: $16.2 billion
- Digital TV (O&O): $1.8 billion
- Broadcast radio: $10.7 billion
- Mobile (advertising on mobile devices: display, search, SMS, video and native): $32 billion
- PC (advertising on desktop: search, display, social): $28 billion
- OTT/CTV: $2.4 billion
Local OTT/CTV Is Fastest-Growing Tactic
We’ve been tracking the trends on OTT/CTV. BIA named it the fastest-growing segment, with a 13.5% increase over 2022, and its trajectory in 2024 and beyond is rising.
What’s propelling its growth? There are several factors. First, it proved to be a winner for local advertising in the 2022 political ad ecosystem. Second, it’s consumer driven, as more people subscribe to streaming platforms. Streaming viewership currently outperforms broadcast and cable. These consumers, however, are opting for ad-supported tiers, with 32% of people choosing this at sign-up.
The third driver is the takeoff of FAST (free ad-supported streaming television) channels. These streaming options are always free and show ads like linear TV does. The fourth area of impact is that advertisers appreciate the ability to “create an audience” in targeting, which can include demographics, location, behaviors and interests.
The growth in this tactic doesn’t necessarily mean that money is shifting from traditional and other digital tactics. Rather, the pie of spending is getting bigger. Look for OTT/CTV as a primary strategy for your local advertisers, and ensure you can deliver it to them.
Now, let’s look at some updates for different verticals.
Local Ad Revenue Industry Updates
The revised projections offered information on several local verticals.
The projections were mostly unchanged, with a 6.6% year-over-year increase. These numbers are still below pre-pandemic spending. However, new car dealer spending has outperformed previous expectations, and OEMs (original equipment manufacturers) are pumping money into EV ads. Tactic-wise, this industry is putting more money into OTT/CTV across all auto tiers — new, used and OEMs.
While supply chain issues are mostly resolved, the industry faces some challenges in financing with higher interest rates. This topic is actually something auto advertisers could lean into to create demand.
Real estate is a key part of local ad revenue. Markets are experiencing different fluctuations, so it’s critical to understand your area. Prices are rising for some as a result of limited inventory. Higher interest rates are also an issue. If they fall, real estate will get a boost. Even if they don’t, the industry could spend more, but they need help with messaging.
Leisure and Hospitality
Consumer demand is still high, and the industry has had an exceptional summer. The primary issue for this vertical is labor shortages, which offers excellent opportunities to support them with recruitment advertising.
An aging population means more spending to meet the needs of this demographic. It would include specialties like nursing, assisted living and residential care facilities. It’s another industry struggling with hiring. These advertisers are more likely to buy OTT/CTV, search, video display and social.
The updated projections also touched on what’s happening and what to expect in political advertising. Ad buying related to the 2024 elections has already started. Broadcast TV will remain at the top of revenue, but OTT/CTV is growing. The current forecast for 2024 for local is $11.9 billion.
The projections also included industries that are decreasing their local ad spending:
- Online gambling, which can see fewer bettors due to economic woes
- Office supply stores
- Insurance (auto and P&C)
- Health and personal care stores
Local Ad Spending Is Evolving; Local Media Companies Need to As Well
The landscape of local ad spending has been gradually changing with the increase in digital tactics, consumer behavior changes and more. As the ecosystem evolves, your business should as well. Explore how you can modernize and land more of these dollars in our new content experience, The Evolution and Resilience of the Broadcast Media Industry: From Dinosaurs to Birds.