‘Especially disappointing’ Q2 earnings results from two of the world’s four largest ad agencies ‘shocked the market,’ Wall Street analyst Michael Nathanson notes. But, there was little surprise for him and his team at MoffettNathanson — the results only reinforced lousy trends for broadcast media seen over the past few years, he writes in a report released Thursday.
MoffettNathanson’s Q2 analysis shows that digital advertising growth in the U.S. continued to grow in the low 20% range.
At the same time, traditional media ad spending fell by 3.6%.
That’s the worst non-Olympic quarterly growth experienced since the end of the 2009 recession, Nathanson points out.
Worse yet, he says, “We believe every traditional media category failed to grow in the second quarter.”
Simply put, traditional media and ad agencies in the U.S. “face the same problem.”
What is that problem?
“They have too much client concentration in sectors such as retail, consumer products, and auto that are not growing budgets and not enough small to medium-sized enterprises that continue to fuel online growth,” Nathanson says. “The limited scale of their client base works as a major drag on growth as these industries experience structural headwinds.”
Post-Q2, Nathanson is lowering his 2017 advertising estimate by 85 basis points, to 2.5% growth in MoffettNathanson’s top-down advertising model.
What’s the breakout by media?
Total television (national plus local) is lower, to a decline of 5% for the year.
Total digital is poised for another year of double-digit growth, and is unchanged at 18.5%. Still, Nathanson says, “this may be too conservative.”
Meanwhile, Nathanson is lowering his radio estimates, along with OOH, newspaper and consumer magazines.
