U.S. Presidential Election: Anticipating Impacts on Advertising Spending

Historical trends in election-related advertising spending

Historical trends in election-related advertising spending show a significant shift towards political alignment and digital platforms. Companies like Comcast have increased political ad spending, while Disney noted a decline in overall revenue due to fewer impressions, highlighting the growing importance of political advertising in their strategies.

"We saw many companies recognize the importance of political spending alignment in response to the insurrection in January 2021. Many companies, including Comcast, pledged to no longer support candidates perpetuated election misinformation as they recognize the importance of upholding a democratic society where business can thrive and compete." --- (CMCSA, event transcript, 2024/06/10)

"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." --- (GOOG, earning call, 2024/Q2)

"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)

""As we near the presidential election, we are excited for Beeswax and DSPolitical to partner to drive impactful, results-oriented advertising using the FreeWheel Identity Network, which bridges first-party IDs with common identity signals, setting a new standard for accuracy and efficiency in voter audience targeting," said Mark McKee, General Manager of FreeWheel." --- (CMCSA, press release, 2024/08/21)

"Advertising revenue increased for the six months ended June 30, 2024 compared to the same period in 2023 driven by an increase in domestic political advertising, increased revenue from our advanced advertising business and the positive impact of foreign currency, partially offset by lower domestic nonpolitical advertising." --- (CMCSA, sec filing, 2024/Q2)

Digital Advertising's Influence on Overall Budgets

Digital advertising is increasingly dominating overall advertising budgets, as seen with Snap's significant budget allocations and Amazon's successful reallocation towards digital tools. However, macroeconomic factors pose risks to these budgets, potentially impacting the advertising ecosystem and user engagement.

"Some advertisers have already gone through a test and learn phase with us and have been working with us for many, many years and already allocate a very significant percent of their digital advertising budget to Snap." --- (SNAP, conference, 2024/05/20)

"We continue to prioritize more of our advertising budget to tools like Advantage+ shopping campaigns and when we recently tested Meta's GenAI Background Generation feature we saw a 13% increase in our return on ad spend." --- (AMZN, press release, 2024/07/29)

"Our focus remains on driving profitability and growth for retailers, helping them optimize digital performance for both online and offline, as well as innovate across our shopping and merchant experiences." --- (GOOG, earning call, 2024/Q1)

"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)

"Such macroeconomic factors may also negatively impact, in the short-term or long-term, the global economy, advertising ecosystem, our customers and their budgets with us, user engagement, other user metrics, and our business, financial condition, and results of operations." --- (SNAP, sec filing, 2024/Q2)

Sector-specific impacts on advertising budgets

Sector-specific advertising budgets are being strategically allocated, with companies like Netflix emphasizing regional and content-specific spending. Coca-Cola highlights the effectiveness of large-scale campaigns, such as during the FIFA World Cup, in driving market share. Overall, firms are balancing growth investments in advertising while managing expenses.

"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)

"And if we look at the impact on our business of those large scale marketing programs, in the case of the FIFA World Cup, we saw an increase in both volume and market share." --- (KO, event transcript, 2024/05/01)

"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)

"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)

"It fits within our existing content budget of about $17,000,000,000 in cash spend this year, so no impact on our operating margin guidance for the year." --- (NFLX, conference, 2024/05/15)

Shifts in consumer behavior during elections

During election periods, consumers tend to prioritize value and budget management due to economic uncertainty. Retailers like Walmart and Target emphasize the importance of value offerings, while shifts in purchasing behavior indicate a move away from general merchandise towards more essential categories.

"So I guess the question is and this is happening at a time when other retailers are maybe doubling down on opening price point and are not seeing a stable consumer. So I guess my question is, how do you maintain the balance of being known for price and value and convenience too, but also welcoming these higher income consumers? And is that a delicate balance that you think about?" --- (WMT, event transcript, 2024/06/07)

"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)

"So we're seeing that benefit from both sides of the consumer that great value in both areas are doing very well." --- (COST, earning call, 2024/Q1)

"And I think during this time, as we're focused on building out our e-commerce omni business, we're being more and more relevant to consumers in different markets." --- (WMT, earning call, 2025/Q1)

"And for us, that's resulted in about a 100 basis point shift away from general merchandise to other categories of our business in the first quarter." --- (WMT, earning call, 2025/Q1)

Forecasting advertising spending based on election outcomes

Forecasts indicate a rise in advertising spending, particularly from technology clients, as companies prepare for potential political shifts due to the U.S. Presidential Election. Major players like WPP and Omnicom highlight the election's significant influence on marketing budgets and overall revenue trends.

"And if we look at the forecast and we talk to our clients about this forecast, they would support a view that we will see increasing spend from technology clients over the course of the year." --- (WPP, earning call, 2024/Q1)

"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)

"In our international markets, the 1.1% organic increase was driven by revenue increases at our media businesses in our Latin America and Continental Europe and regions and increases at our advertising businesses in our Continental Europe and United Kingdom regions, partially offset by revenue decreases at our digital project-based offerings across most regions and revenue decreases at our media businesses in our Asia Pacific region." --- (IPG, sec filing, 2024/Q2)

"That said, we do see momentum improving over the rest of the year. We expect technology clients to turn from a negative in Q1 to a positive over the course of the year and the impacts of budget cuts will tail off while we have a strong new business pipeline." --- (WPP, earning call, 2024/Q1)

"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)

Impact of Social Media on Election Advertising

Social media significantly impacts election advertising, with concerns over misinformation and targeted manipulation of demographics. Companies like Alphabet and Snap highlight the challenges of user engagement and the potential for harmful content, emphasizing the need for responsible advertising strategies in the electoral context.

"For years, we've seen the significant proliferation of mis and disinformation through social media platforms and how the abuse of these platforms has the power to destabilize our public institutions by fostering election disputes, COVID conspiracies and more, but now the stakes are higher." --- (GOOG, event transcript, 2024/06/07)

"In North America, some of our changes have been disruptive, and this contributed to mixed results on time spent with content, which declined by just under 2% on a year-over-year basis while increasing nearly 6% on a quarter-over-quarter basis in Q2." --- (SNAP, earning call, 2024/Q2)

"There is widespread concern that Alphabet's media platforms, specifically YouTube, continue to be used in ways that are harmful to children, including online sexual abuse and exploitation, human trafficking, the impact of social media on children's mental health, and the role that generative AI may play in potentially exacerbating these risks." --- (GOOG, event transcript, 2024/06/07)

"And so I think we've just been really excited to see that their passion for our service and their usage of our service has also, I think, encouraged them to try out Snapchat for growing their business with our advertising tools." --- (SNAP, earning call, 2024/Q2)

"In its latest quarterly security report, the social media company reported that certain accounts were masquerading as Jewish students, African Americans, and other concerned groups, targeting audiences primarily in the United States and Canada." --- (GOOG, press release, 2024/05/30)

Regional Variations in Advertising Spending Patterns

Regional advertising spending patterns are influenced by seasonal trends and viewership changes, as highlighted by Disney's focus on sports revenues. Walmart emphasizes the importance of understanding regional purchasing behaviors and the effectiveness of advertising across different platforms, indicating that strategies must adapt to local market dynamics.

"Revenues - Advertising Higher advertising revenue reflected an increase of 29% from higher impressions at Disney+ and Hulu, partially offset by a decrease of 10% from lower rates." --- (DIS, sec filing, 2024/Q2)

"So one question that we are getting from the suppliers that are subscribing to Luminate is help me understand that if I'm seeing this particular purchasing or trends in terms of sales in one particular region, and it could be timely, let's say that it's seasonal candy might be an example." --- (WMT, conference, 2024/09/11)

"MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Sports revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, and the availability of and demand for sports programming." --- (DIS, sec filing, 2024/Q1)

"That's really compelling to an advertiser. I think that's one of the things, one of the reasons why we're seeing some of the growth that we are in this category because advertisers are recognizing that they have that lineage between the transaction, whether it's offline or online, and there's really high fidelity around the advertising dollars that are spent. And so that's something that I'm really" --- (WMT, conference, 2024/06/12)

"Linear broadcast advertising is a great example of this. You show the ad, but you may not understand if someone saw the ad, did they actually then take some action or come into the category to make a purchase for that promoted product, whereas you see those things pretty clearly and with real fidelity when you're in the e com space." --- (WMT, conference, 2024/09/11)