After a year-long decline, out of home advertising is back on the rise again. Cause for celebration? Yes, though wait on the balloons and confetti. While this is a good sign, certainly, it comes with enough caveats to fill a Corvette.
So let’s look at the numbers, and then let’s look at what they mean in a historical and more recent context.
Second-Quarter Advertising Jumps Year Over Year
The big headline is that OOH advertising finally increased compared to the previous year. The Out of Home Advertising Association of America reports that second-quarter advertising bounded up by 38% compared with the same period in 2021. What’s more, and this isn’t mentioned in the OAAA’s headline but is pretty relevant, ad spending saw a gigantic increase from first to second quarter of this year.
First-quarter spending was $1.3 billion. Second-quarter spending was $2 billion.
Digital out of home spending saw particular demand, with revenue up 80% over last year. Every top-10 industry product category was up double-digit percentages over last year, including local miscellaneous services and amusements, retail, insurance and real estate, and restaurants.
Insurance and real estate had the largest rise, probably little surprise in light of the nationwide boom in home sales. And the seven biggest categories all experienced growth of at least 32% vs. last year.
Consider that during the same time in 2020, ad spending fell 45 percent, to $1.477 billion, and you can appreciate why the industry was so thrilled with this report. It contains a lot of good news, and it matches what we see in the industry right now. Advertisers are ramping up spending, and it’s been busy, busy, busy for fourth quarter.
But every quarterly spending report also includes critical tidbits that might otherwise go unnoticed and tell a deeper story.
The Underlying Data: How Healthy Is the OOH Economy?
Four things stood out in looking at the entire OOOA report. They speak to a healthier economy, though not one that has completely recovered.
- Almost half of the top 100 advertisers more than doubled their spending. Such big gains are harder to write off than a handful of advertisers upping their spending by 10%. That suggests substantial confidence in the medium.
- Twenty top-100 advertisers bumped up spending by at least tenfold, and a lot of them are companies that actually saw the need for their services rise because of the pandemic, including DoorDash, Postmates and T-Mobile. It’s harder to predict the sustainability of that spending.
- Over a quarter of the top 100 companies were direct-to-consumer or technology companies. Again, their spending can rise and fall with the tides depending on what’s trending, so forecasting a long-term rise wouldn’t be wise.
- The New York City Department of Health & Mental Hygiene ranked among the top 10 advertisers. Talk about a sign of the times — this definitely won’t last post-pandemic.
Historical Data: How Does Q2 2021 Stack Up?
Of course, while we see recovery, we’re still a long way from the heady days of pre-2020, when every quarter seemed to bring new ad dollar highs. Second quarter’s top 10 advertisers totaled barely half of what the top 10 spent during the same time period in 2019.
But, as with so many things post-COVID, we may need to just accept this as the new normal for the time being. The adjustment has happened with many types of media, and, in fact, OOH is still much better off than other traditional advertising platforms.
That’s one thing that hasn’t changed since 2019. Back then, out of home was the only traditional format showing year-to-year gains. Otherwise, just digital was growing. OOH maintained its appeal to advertisers and arguably even become more relevant during a period where we spend more time outside than we did in the past. Magna has projected that OOH will be up 10.4 percent this year, second only to digital in annual growth.
So historically, outdoor’s numbers probably won’t compare well for a while. But when you look at them next to other ad formats, they look promising. There’s still room for growth here.
Looking Forward in the Second Half of 2020
Total spending in 2020 fell to $6.1 billion, the lowest total since 2010 and ending a decade-long streak of year-to-year gains. So far this year, advertisers have spent just over $3.3 billion total. During the second half of last year, advertisers spent $2.735 billion.
Assuming that the economic recovery continues, and right now that seems likely even with the number of COVID-19 cases back on the rise, the year could out-earn 2020. Even if spending rebounds by a smaller margin than in second quarter, we could still see gains in overall spending. Here are a few things that will contribute to second-half gains:
- The always-strong fourth-quarter spending blitz: Advertisers will be eager to take advantage of a more “normal” year to get shoppers into their stores following a disappointing 2020. The entertainment industry, including music, has saved up some big events for later in the year, anticipating that people would feel more comfortable congregating. Movies have begun to rebound, so spending on year-end blockbusters will be up appreciably from 2020.
- The hot real estate category could need an assist: Though sales are way up and home prices have skyrocketed by nearly 25% since the pandemic began, forecasts show a chillier fall. What happens when a hot segment cools? Advertisers ramp up spending. They want to continue to stoke excitement for what they sell. Spending soared by $50 million during second quarter, a breakneck 45% growth rate, faster than any other top-10 category. If that continues or even rises, it will go a long way toward a rosier second half.
- Retail, too, may pour in more dollars. The National Retail Federation raised its outlook for year-to-year retail spending gains in June, citing a faster-than-expected economic recovery. Although inflation fears have dampened public sentiment more recently, with consumer confidence also declining, spending at stores, gas stations and car dealerships remains healthy. Retail is the No. 2 category overall during the first half of the year, spending $345 million and up 8.8% over last year. With the holiday season on the horizon, retailers could bump up spending appreciably.
We’re looking forward to the second half of the year for many reasons, and we’re eager to see how ad spending plays out. Want to share your own insights or ready to dive back into advertising after a break? You can always contact us with questions or to learn more.