After years of cord-cutting, many industry participants predicted that the growth of digital advertising throughout the pandemic (aided by the acceleration of e-commerce) would result in a substantial permanent reallocation of advertising spend from traditional media (typically defined as traditional broadcast TV, radio and out-of-home) to digital formats, including search, social and online video. According to Magna Global, during 2020, local broadcast TV (excluding political), radio and out-of-home advertising were down 18.7%, 31% and 24.8%, respectively. Meanwhile, search, social and online video were up 11.6%, 21.4% and 23.8%, respectively.
To make matters worse, the well-advertised supply chain issues impacting the auto industry have persisted year-to-date and do not show signs of improving soon. Autos has historically been among the largest advertising categories for traditional media companies, particularly TV and radio. Without sufficient inventory, local dealerships have continued to hold off on advertising spend, creating incremental headwinds for traditional media advertising revenue.
Nevertheless, beginning in the second half of 2020, traditional media advertising trends began to demonstrate consistent sequential improvement, and the impressive recovery has continued year-to-date with 1H21 linear TV revenue (excluding political) up 22.5% year-over-year. Key drivers of the recovery have been the broader economic recovery, a robust consumer spending environment and high growth emerging advertising categories, most notably sports betting. Based on our most recent conversations with management teams, it does not appear that the recent spike in Delta variant cases has had a material impact on the demand environment, particularly since we have not seen new mobility restrictions implemented.
As such, despite a rise in cases and supply chain issues, expectations for a solid full-year recovery in traditional media advertising remain on track. Our longer-term view on the sector remains cautious given shifting trends in media consumption, but most traditional media companies are well positioned headed into 2022. These companies should reap the benefits of a record non-presidential advertising year, the eventual improvement of auto supply chain issues and further post-COVID normalization.