U.S. Presidential Election: Anticipated Effects on Advertising Spending

Historical trends and anticipated budget allocations

Historical trends indicate a shift from traditional to digital advertising, with companies like Google noting budget reallocations. Despite recent revenue declines, firms like WPP express confidence in future growth, suggesting a strategic increase in advertising budgets as the presidential election approaches.

"This held back our growth to 0.9 10th 1 percent in 2023, now though we were pleased to achieve a slight increase in headline operating margin in constant currency. Now as anticipated earlier this year, the opening months of 2024 have also been challenging with a fall in revenue less pass through cost in the Q1." --- (WPP, event transcript, 2024/05/08)

"from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices." --- (GOOG, earning call, 2024/Q2)

"And that will only build as we go out throughout the balance of the year. So the -- what you've seen in Precision Marketing, we're hopeful and we have some confidence -- we have confidence given the factors of what impacted us up to now that you'll see a reversal of that, an improvement in organic growth in the third and the fourth-quarter and then as we get into next year." --- (OMC, earning call, 2024/Q2)

"Revenues - Advertising Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Domestic $ 672 $ 762 (12) % International 235 243 (3) % $ 907 $ 1,005 (10) % The decline in domestic advertising revenue was due to a decrease of 15% from lower impressions attributable to a decline in average viewership, partially offset by an increase of 1% from higher rates." --- (DIS, sec filing, 2024/Q3)

"And our investment is phased reasonably, balanced through the year. And so that's really the way to think about it. So that 20 to 40 basis point increase will be H2 weighted." --- (WPP, earning call, 2024/Q1)

Sector-specific impacts on advertising budgets

Sector-specific advertising budgets are being strategically adjusted in anticipation of the U.S. Presidential Election. Companies like Netflix are focusing on regional and content-specific allocations, while Amazon emphasizes controlled spending. Retailers like Target are adapting to consumer budget constraints, indicating a shift in advertising strategies across sectors.

"Or is there specific budgets by region? No, there are definitely specific budgets by region, by content vertical or category." --- (NFLX, conference, 2024/05/15)

"Now, business customers can set spend thresholds and make budget amounts visible to buyers to get ahead of overspending." --- (AMZN, press release, 2024/06/20)

"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)

"The rate of growth, it just happens to be growing off of a relatively small base because we're starting from only 18 months into ads so to have the kind of a primary revenue impact across a business that has been primarily subscription for a long-time that just takes some time. So we're scaling well through reach, through engagement, through growing inventory and that represents opportunity for us over a multiyear trajectory to have a big and increasing revenue and profit impact on the business." --- (NFLX, earning call, 2024/Q2)

"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)

Digital vs. traditional media spending trends

Digital media spending is on the rise as traditional media, particularly linear television, faces declines in audience ratings and subscriber numbers. Companies like Disney and Comcast are pivoting towards digital platforms, while WPP notes reduced spending in traditional media, highlighting a clear shift in advertising trends.

"We believe we have a very well-balanced offer with the leading positions in media, creative, production, digital and public relations as well as an unparalleled global footprint, that along with the recognition of our creative agencies, gives us cause to see the strength of that combined offer with clients." --- (WPP, earning call, 2024/Q1)

"We expect that the number of subscribers and audience ratings at our linear television networks will continue to decline as a result of the competitive environment and shifting video consumption patterns, which we aim to mitigate over time by continued growth in paid subscribers and advertising revenue at Peacock." --- (CMCSA, sec filing, 2024/Q1)

"I guess I'm wondering, along with some of those changes in behavior, is there a way to quantify that overall engagement shift, whether that's an increase in time spent, increase in over the level of increase in queries for both sort of traditional search as well as more generative answers." --- (GOOG, earning call, 2024/Q1)

"So we believe that by the time this kicks in and a year from now that a lot of the pieces will be in place in terms of driving more advertising revenue, more distribution revenue, moving to digital." --- (DIS, earning call, 2024/Q2)

"So we've seen reduced spend across our media clients in that market, and that is weighing on the quarter-on-quarter performance." --- (WPP, earning call, 2024/Q1)

Strategies from major advertising agencies

Major advertising agencies are emphasizing creativity and audience-led solutions as key strategies for the upcoming U.S. Presidential Election. Omnicom Group highlights the need for creative insights to differentiate in a competitive landscape, while Interpublic Group focuses on organic growth and new capabilities in high-growth areas like media. WPP is leveraging advanced technology to enhance engagement in campaigns.

"You can take the most sophisticated AI enabling tools. And if you give them to everybody, you'd still be at parity and you need creative insights and thought in order to differentiate and to beat your competitor in effect. So the method and the activities that we go through which get attributed historically to advertising versus media versus CRM, they shift within the share of wallet, but the concept of advertising thought of from a creative point-of-view will continue to grow and prosper even as these tools develop." --- (OMC, earning call, 2024/Q2)

"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/Q2)

"CMI's portfolio of major pharmaceutical clients can now access KERV's market-leading, next-generation online video, display, and connected TV (CTV) advertising technology, along with KERV's proprietary Active Attention Index scoring and metrics to drive enhanced engagement and optimize towards deterministic attention-based performance for their video advertising campaigns." --- (WPP, press release, 2024/06/12)

"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)

"These opportunities, organic growth in our existing client base and accelerating the development of new capabilities in areas such as retail media and commerce, we'll continue to have our full focus as we look to deliver the best outcome this year and reignite a higher level of growth going forward. In certain high-growth areas where scale would benefit our competitive position and the company's overall growth profile such as commerce, retail, media and" --- (IPG, earning call, 2024/Q2)

Influence of political advertising on consumer behavior

Political advertising significantly influences consumer behavior by leveraging advanced targeting technologies, which can enhance engagement and campaign effectiveness. However, companies must navigate the risks of overt political stances, as consumer reactions can vary, impacting overall advertising strategies and spending patterns.

"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)

"Consequently, advertisers may potentially analyze consumer behavior more effectively and refine their campaigns, while game developers could create more engaging and immersive user experiences." --- (AMZN, press release, 2024/06/21)

"Because time and again and particularly in the last few years, the market has punished companies for being overtly political, Netflix included." --- (NFLX, event transcript, 2024/06/06)

"In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months." --- (DIS, sec filing, 2024/Q2)

"This advancement leads to more efficient ad spending and higher customer engagement levels, transforming how ads are crafted and delivered." --- (GOOG, press release, 2024/06/13)

Economic conditions affecting advertising budgets

Economic conditions are mixed, with rising living costs and inflation impacting household budgets, yet optimism among small businesses is increasing. Despite some consumer pessimism, advertisers still find funding available, indicating a complex landscape for advertising spending influenced by both economic realities and perceptions.

"This lack of understanding can lead to poor investment choices and inadequate savings strategies. Rising Cost of Living: The increasing cost of living, particularly in major urban centers, significantly burdens household budgets." --- (V, press release, 2024/08/19)

"And then secondly, on the advertising side, there is no shortage of dollars for advertisers looking to market on LinkedIn." --- (MSFT, conference, 2024/06/06)

"Of our non investment grade exposure, 70% is secure. In the past year, we've clearly seen the impact of higher labor costs, baseline inflation, interest rates along with elevated geopolitical and market uncertainty and through all of this, any stressful losses that we have seen to date have been idiosyncratic or concentrated in sectors that we've been watching closely." --- (JPM, event transcript, 2024/05/20)

"This steady growth has fostered a brighter economic outlook, with more than half (59%) of surveyed U.S. SMBs expressing optimism about the future of the economy, up from 47% in 2023." --- (V, press release, 2024/06/13)

"Though the economy remains healthy by most measures and inflation is well below its peak, many Americans have a pessimistic view of the economy, with more than 50% believing that the U.S. is in a recession." --- (JPM, press release, 2024/07/30)

Impact of social media on campaign advertising

Social media platforms are increasingly enhancing their advertising capabilities, with companies like Snap and Pinterest reporting significant revenue growth driven by improved ad solutions and user engagement. The integration of AI tools by Meta further optimizes ad performance, highlighting the critical role of social media in campaign advertising strategies for the upcoming election.

"The growth of our community, the progress we have made with our direct response advertising business, and the success of our Snapchat Plus subscription business that now reaches more than 11 million subscribers, all contributed to revenue growth of 16% year-over-year, despite the impact of a weaker brand advertising environment for certain consumer discretionary verticals." --- (SNAP, earning call, 2024/Q2)

""By leveraging Amazon Bedrock through Zeta Marketing Platform, the company's customers can create high-quality creative content at scale, personalize contextually relevant advertising experiences, segment audiences for advertising campaigns, and optimize campaigns for better visibility." Back in May, Meta Platforms, Inc. (NASDAQ:META) revealed a slate of new Gen-AI-powered tools and services aimed at helping businesses increase their ad performance and improve their visibility on its popular social platforms Facebook and Instagram." --- (GOOG, press release, 2024/07/29)

"We continue to drive increases in ad load through whole-page optimization, which increases the supply of relevant ads to users in moments of high commercial intent, and we see opportunity to increase ad load moving forward as we further improve the actionability of our users' journeys and the relevance of our ads." --- (PINS, earning call, 2024/Q2)

"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)

"So I think that's demonstrating that we have a unique space to be occupied with the user where they see us as something distinct and separate from the rest of social media, where social media tends to be lean back entertainment, we have lean forward commercial intent." --- (PINS, earning call, 2024/Q1)

Regulatory changes affecting advertising strategies

Regulatory changes are expected to significantly impact advertising strategies, particularly in the entertainment sector. Companies like Disney highlight how these changes affect advertising revenue growth, costs, and overall business performance, while Google notes that regulatory actions can alter market conditions and advertising strategies.

"affect entertainment, travel and leisure businesses generally and may, among other things, affect (or further affect, as applicable): our operations, business plans or profitability, including direct-to-consumer profitability; our expected benefits of the composition of the Board; demand for our products and services; the performance of the Company's content; our ability to create or obtain desirable content at or under the value we assign the content; the advertising market for programming; income tax expense; and performance of some or all Company businesses either directly or through their impact on those who distribute our products." --- (DIS, press release, 2024/04/03)

"Factors that could cause the actual results to differ materially from those in forward-looking statements include regulatory actions, market prices, and continued availability of capital and financing, and general economic, market or business conditions." --- (GOOG, press release, 2024/05/23)

"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)