Startups’ TV Advertising Soars in New Report

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Author: Nate Ives. Source: WSJ

Young brands that once advertised nearly exclusively through digital media are moving into television at a rapid clip, according to a new report on U.S. ad spending for the U.S.

So-called direct-to-consumer marketers increased their ad spending 32% in the first half of the year, but grew their national TV ad spending by 52.9%, according to estimates from ad-buying group Magna Global. That follows a 35.8% increase in their national TV spending last year.

“It’s from a low base, obviously, because until three years ago, they were almost 100% digital, but the growth continues to be strong,” said Vincent Létang, executive vice president of global market intelligence at Magna, which is part of Interpublic Group of Co s.

DTC companies made their mark by cutting out middlemen such as physical retail distributors and using targeted social-media advertising to find customers instead.

As they have matured, however, high-profile examples such as Warby Parker and Casper Sleep Inc. have opened stores and begun advertising more broadly.

Traditional ad sellers now hope that they can become a major new revenue source.

Excluding the effects of cyclical events such as elections and World Cup soccer, overall ad spending in the U.S. will grow 6.3% this year to $221 billion, Magna predicted, adjusting an earlier forecast of 5.1%.

Without the benefit of cyclical events, ad spending growth will slow next year to 3.8% as economic growth decelerates, according to Magna.

“The good news from an advertising standpoint is that historically, advertising is correlated to personal spending more than overall gross domestic product, and personal spending is not expected to slow down that much,” Mr. Létang said. “Consumer brands need to speak to individual consumers.”

Factoring in the 2020 election campaign cycle as well as advertising around the Tokyo Summer Olympics, however, will yield a 6.2% overall jump in ad spending next year, Magna said, adjusting its previous 5.8% forecast upward.

Political campaigns are likely to continue boosting their activity on social media, providing an incremental lift of roughly 3% next year, and local TV will continue to collect the largest slice of campaign spending, Mr. Létang said.

“Increasing political budgets will allow every media type to benefit to a degree,” he said.