Anticipating Advertising Spending Impacts from the Upcoming U.S. Presidential Election

Historical trends in election-year advertising spending

Historical trends in election-year advertising spending show that significant events like U.S. elections drive increased political advertising, impacting overall revenue. Companies like Disney noted a rise in political ad spending, while Omnicom highlighted the influence of political climates on advertising strategies, indicating a dynamic shift in spending patterns during election years.

"Certain global events targeted by major marketers for advertising expenditures, such as the FIFA World Cup and the Olympics, and certain national events, such as the U.S. election process, may affect our revenue period-over-period in certain businesses." --- (OMC, sec filing, 2024/Q1)

"And I think it tends these days to shift spend more within a year than perhaps from one year to the next and maybe more of a quarterly impact than it is sort of an annual impact." --- (WPP, earning call, 2024/Q1)

"Revenues - Advertising   Quarter Ended % Change Better (Worse) (in millions) March 30, 2024 April 1, 2023 Domestic $ 743 $ 813 (9) % International 231 218 6 % $ 974 $ 1,031 (6) % The decline in domestic advertising revenue was due to a decrease of 12% from fewer impressions, partially offset by an increase of 3% from higher rates primarily due to increased political advertising at the owned television stations." --- (DIS, sec filing, 2024/Q2)

"YouTube ads revenues were up 13% year-on-year driven by growth and brand as well as direct response." --- (GOOG, earning call, 2024/Q2)

"Here we are in almost August and we're hoping for one cut. And that irrespective of the political elections actually have more of a longer-term impact on the way CEOs or the ones I deal with think about investments that they're going to make in their business and what they're doing. There's also a question that gets risen or rises in terms of -- there's a pretty stark difference in this country between whether there's a Republican-controlled government or a Democratic-controlled government and there'll be implications, both positive and negative if you position yourself correctly for them in terms of where the dollars are going to flow. So all that leads to is no one's euphoric." --- (OMC, earning call, 2024/Q2)

Shift from traditional to digital advertising

The shift from traditional to digital advertising is evident as brands increasingly allocate budgets from linear TV to platforms like YouTube, driven by strong viewer engagement and measurable business outcomes. Companies like Amazon and Netflix emphasize the advantages of digital targeting and ROI measurement, further supporting this transition.

"is continuing to benefit from a combination of strong watch time growth, viewer and advertiser innovation and a shift in brand advertising budgets from linear TV to YouTube." --- (GOOG, earning call, 2024/Q2)

"Anonymous: And why don't we just shift to, key growth drivers in the, marketing solutions business, your digital B2B advertising?" --- (MSFT, conference, 2024/06/06)

"With ads and prime video, the exciting opportunity for brands is the ability to directly connect advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription signups." --- (AMZN, earning call, 2024/Q2)

"So I think a lot about this is targeting relevance, more capabilities in that space as well as thinking about how do we do ROI, ROAS, incrementality measurements, all the things that we want. And ultimately, really this is about bringing what has been amazing about digital advertising in" --- (NFLX, earning call, 2024/Q2)

"In the first quarter, living room benefited from a combination of strong watch time growth, innovation in the user and advertiser experience, and a shift in brand advertising budgets from linear TV to YouTube." --- (GOOG, earning call, 2024/Q1)

Sector-specific impacts on advertising budgets

Sector-specific advertising budgets are being influenced by rising commodity costs and changing consumer behaviors. Companies like Coca-Cola are increasing marketing spending to adapt, while retailers like Target are lowering prices to attract budget-conscious consumers, indicating a strategic shift in advertising approaches across sectors.

"The increase in operating income was primarily driven by favorable pricing initiatives, partially offset by a decline in concentrate sales volume of 1%, higher commodity costs, increased marketing spending, higher operating expenses and an unfavorable foreign currency exchange rate impact of 7%." --- (KO, sec filing, 2024/Q1)

"While our team is always committed to value, it's particularly important in today's environment as consumers look for ways they can stretch their budgets in the face of suddenly high prices." --- (TGT, earning call, 2025/Q1)

"Just trying to get some color on customer behavior given some of the broader inflationary pressures." --- (AAPL, earning call, 2024/Q2)

"The increase in operating income was primarily driven by favorable pricing initiatives, partially offset by higher commodity costs, increased marketing spending, higher operating expenses and an unfavorable foreign currency exchange rate impact of 18%." --- (KO, sec filing, 2024/Q2)

""Our teams work hard to deliver great value every day, and these new lower prices across thousands of items will add up to additional big savings for the millions of consumers that shop Target each week for their everyday needs. New lower prices for Memorial Day and every day Consumers will find reduced prices on everyday items needed to run their households and maximize their budgets, especially as they stock up for Memorial Day, Fourth of July and back-to-school and back-to-college season."" --- (TGT, press release, 2024/05/20)

Consumer sentiment and its influence on advertising

Consumer sentiment significantly influences advertising effectiveness, as relevant and helpful ads drive customer action. Current macroeconomic pressures, including price increases, may lead to consumer pushback, impacting advertising demand and strategies across sectors like retail and media.

"And advertising really only works if the ads are helpful to customers and relevant to what they're shopping for, which ultimately leads to customers taking action and buying and success for advertisers, too." --- (AMZN, event transcript, 2024/05/22)

"But I wanted to ask what you're seeing more immediately in terms of advertising demand today, given some of the macro pressures that have recently come to light." --- (DIS, earning call, 2024/Q1)

"We, along with other retail companies, are influenced by a number of factors including, but not limited to: catastrophic events, weather and other risks related to climate change, global health epidemics, competitive pressures, consumer disposable income, consumer debt levels and buying patterns, consumer credit availability, disruptions in supply chain and inventory management, cost and availability of goods, currency exchange rate fluctuations, customer preferences, deflation, inflation, fuel and energy prices, general economic conditions, insurance costs, interest rates, labor availability and costs, tax rates, the imposition of tariffs, cybersecurity attacks and unemployment." --- (WMT, sec filing, 2025/Q1)

"measurement and ad tech, so brands can continually improve the relevance and performance of their ads." --- (AMZN, earning call, 2024/02/07)

"I think there's probably some concern out there that the recent price increases might face some consumer pushback." --- (DIS, earning call, 2024/Q1)

Advertising agencies' strategies for election campaigns

Advertising agencies are focusing on high-quality, performance-driven campaigns while integrating social and environmental advocacy. They are leveraging digital strategies and creativity to engage audiences effectively, with capabilities in political consulting enhancing their election campaign strategies.

""Our advertisers strive to deliver campaigns of the highest quality and meet performance goals while simultaneously integrating strategies to minimize carbon emissions." --- (IPG, press release, 2024/07/01)

"Through exhibitions, events, workshops, public voting, and awards, we seek to inspire positive change by demonstrating how advertising communication can be a powerful tool for social and environmental advocacy. Join us on Linkedin, Instagram and Facebook." --- (OMC, press release, 2024/06/17)

"To bridge this knowledge gap, and empower marketers with better engagement and decision-making, Doceree introduced HIEP as a medium that could help brands forge neatly choreographed digital strategies, thereby bringing efficiency to operations at scale and improve business outcomes." --- (WPP, press release, 2024/05/15)

"Integrating ideas into audience-led and accountable solutions is a must that creativity can be a differentiator and our performance of creative competitions continues to indicate we're well placed when it comes to the talent and craft required to make work that makes a difference for ambitious marketers. Just last week, the New York Festivals Advertising Awards named Interpublic as its Holding Company of the Year." --- (IPG, earning call, 2024/Q1)

"It is home to three of the top global PR agencies FleishmanHillard, Ketchum, Porter Novelli and more than a dozen specialist agencies in corporate and public affairs, political consulting and advertising, language strategy, global health strategy and organizational transformation." --- (OMC, press release, 2024/08/14)

Post-election advertising spending outlook

Post-election, major players like Netflix and Disney are optimistic about advertising spending, anticipating revenue growth driven by increased rates and strategic investments. Netflix plans to enhance ad spending while managing costs, indicating a robust outlook for the advertising sector influenced by the election.

"So we're -- we make trade-offs all-the-time with the business where our expenses are up 7% year-to-date where if you kind of step-back, we're on track to be -- you can do the math, it's probably north of $28 billion in total expenses across our business for the year and we're still expecting to deliver five percentage points of margin improvement.So we try to run the business like owners, make smart trade-offs and invest into growth like live, like ads, like games, like product innovation and ads as part of that, both for this year as well as into next year where again we expect to drive revenue growth and increase our margins while investing into ads?" --- (NFLX, earning call, 2024/Q2)

"Advertising revenue growth attributable to increases in rates and sponsorship revenue Growth in subscription revenue due to higher rates An increase in programming and production costs primarily attributable to higher NBA rights costs reflecting contractual rate increases and costs to air the Stanley Cup Finals in the current quarter." --- (DIS, press release, 2024/08/07)

"Sure. And let let me first start by saying, we're generally very optimistic about, advertising in the ads business." --- (NFLX, conference, 2024/05/15)

Key industries driving election advertising growth

Key industries driving election advertising growth include media and entertainment, as highlighted by Disney's 25% increase in advertising revenue. Additionally, Amazon is expanding its advertising offerings, particularly in Sponsored Products and streaming TV ads, positioning itself to capitalize on election-related spending.

"Revenues - Advertising Higher advertising revenue in the current quarter compared to the prior-year quarter reflected an increase of 25% from higher impressions, partially offset by a decrease of 17% from lower rates. Key metrics" --- (DIS, sec filing, 2024/Q2)

"We continue to see many opportunities to grow our offerings, both in areas that are driving growth today like Sponsored Products and in areas that are newer like streaming TV ads." --- (AMZN, event transcript, 2024/05/22)

Impact of social media on political advertising effectiveness

Social media's impact on political advertising effectiveness is mixed. While platforms like Snap report revenue growth from improved advertising solutions, concerns about bias and policy changes at Alphabet highlight challenges in targeting and measuring ad effectiveness, potentially undermining political messaging.

"Although, target advertising plays a significant role in Google's business model, research has shown that such technologies can negatively impact human rights, including violating privacy and freedom of expression and perpetuating systemic discrimination and inequality.In our view, Alphabet has not demonstrated a robust and transparent due diligence system to identify, address and prevent the adverse human rights impacts stemming from its AI driven target advertising technology." --- (GOOG, event transcript, 2024/06/07)

"Our revenue, particularly in North America, has further been impacted by platform policy changes and restrictions that affected our targeting, measurement, and optimization capabilities, and in turn our ability to measure the effectiveness of advertisements on our services." --- (SNAP, sec filing, 2024/Q1)

"Can you say echo chamber? But this is not the only reason that the 17.92 exchange rates Alphabet a high risk on its corporate bias ratings. Distilling the report, Alphabet has demonstrated a willingness to censor conservatives and Christians on its platforms and to police protected speech in discriminatory ways, discriminates against conservatives and religious non profits in its charitable giving, and regularly uses its corporate reputation and funds to advance ideological causes." --- (GOOG, event transcript, 2024/06/07)

"We have made significant progress to start the year with revenue growing 21% year-over-year, an acceleration of 16 percentage points over the prior quarter growth rate, which was driven by improvements we have made to our advertising platform and an increase in demand for our advertising solutions while also benefiting from the impact of an improved operating environment." --- (SNAP, earning call, 2024/Q1)

"Those policies apply equally for everyone, and we enforce them consistently, regardless of the content creator's political views. And our recommendation system is not designed to promote, to demote, or to filter content based on political perspectives." --- (GOOG, event transcript, 2024/06/07)