Big tech companies like Google and Facebook, as well as newer direct-to-consumer (DTC) tech upstarts like Away and Peloton, are driving advertising growth for legacy industries, like traditional television and out-of-home (billboard) companies.
Why it matters: The very industry that's upending legacy media companies is also the one that's keeping their ad businesses afloat.
Driving the news: Out-of-home (OOH) advertising grew by high-single digits for the third consecutive quarter during Q2 of this year, according to Vincent Letang, executive vice president and director of global forecasting for Magna Global, the media buying unit of global ad agency IPG.
- The reason for such high growth is increased spending by the tech sector, per Letang. Amazon increased its spend by 130% last quarter, while Apple increased by 22%. Letang notes that DTC brands also increased spend.
- Last year, a quarter of top OOH spenders were major tech brands, according to the Out of Home Advertising Association of America.
- Netflix in particular has been increasing ad spend, as it vies to promote movies to critics in Hollywood. One billboard executive says Netflix's out-of-home spending has so far doubled this year compared to last year.
Television networks are also seeing increases, thanks in large part to the commercial spending by tech rivals on linear channels. Both broadcast and cable networks saw their ad businesses grow and stabilize, respectively, last quarter, due in part to the investments made by big tech companies with heavy pockets.
- "Well over $1 billion this year came from digital-native companies that literally didn't advertise 4 or 5 years ago," NBC Universal CEO Steve Burke noted on Comcast's second quarter earnings call.
- "Companies like Amazon, Facebook, Google and Netflix are spending big, big dollars on network television," CBS Chief Revenue Officer Jo Ann Ross said on CBS' second quarter earnings call.
Be smart: The investments being made by big tech companies and newer companies that are just beginning to join the TV advertising market are a reflection of a healthy economy.
- "Digital companies like Google, Facebook, Wayfair, etc., have been driving so much growth in the last two years in total advertising," says GroupM's Brian Wieser, one of the top advertising industry analysts.
Yes, but: Wieser notes that as these mega-companies mature, their growth rate, and thus ad spend growth rate, is also likely to slow, which could cut ad growth for the rest of the advertising ecosystem.
Flashback: In the late '90s, spending by dotcom-era tech companies flooded print outlets, particularly magazines and newspapers, with cash. When that market collapsed at the turn of the millennium, print began a long decline that hasn't yet ended.