Political Ad Spending Set to Soar

posted by NCC Media on August 22, 2010

Share on Facebook0Tweet about this on TwitterEmail this to someone

by Steve McClellan

ADWEEK (August 23, 2010) – The economy is still shaky, but that won’t stop politicians from spending a record amount this year on advertising to sway mid-term election results. And the political advertising floodgates will open right after Labor Day spewing messages — and an inordinate amount of mud, according to analysts — right up to Election Day on Nov. 2.

According to Borrell Associates, political ad spending will reach $4.2 billion this year, double the $2.1 billion the firm estimated was spent in 2008.

And Campaign Media Analysis Group (CMAG), a unit of WPP’s Kantar, also expects a record total, with up to $2.8 billion being spent by candidates and various special interest groups, vs. the $2.6 billion it said was spent two years ago.

Political spending this year is eye opening given that general market advertisers aren’t expected to return to pre-recession spending levels until at least 2013, according to PricewaterhouseCoopers.

It’s also striking given that 2010 is a mid-term election, when spending usually dips below the previous presidential campaign cycle. But not this year: “It’s become an endless campaign, that’s really what we’re seeing,” said Kip Cassino, vp research at Borrell.

Evan Tracey, president of CMAG, notes that this mid-term cycle has an unusual amount of highly competitive races, including close to 100 congressional elections, vs. the normal 35 to 40. In addition more than half of all the gubernatorial and senate seats are up for grabs.

“I can’t remember that much turnover before and they all feel like they’re in the cross-hairs of voters,” he said of the candidates. “And that competitiveness drives the spending.”

A January 2010 U.S. Supreme Court decision (Citizens United Vs the Federal Election Commission) also eased rules for corporate campaign contributions. Borrell estimates that the decision makes way for an additional $400 million in ads.

The robust spending is particularly good news for local broadcasters and cable operators — media businesses that suffered more than most during last year’s recession.

While both sectors have seen a rebound in their core businesses this year, the political dollars will help sustain the turnaround, executives said.

According to Steve Lanzano, president of the TVB, a local station trade group, most of its 600 members have reported core revenue gains in the 20 to 25 percent range so far this year. Political spending is “icing on the cake,” he said, although the group is not taking it for granted. “We’ve been very active in presenting our case,” to the candidates and various political consultant groups, he said.

The basic pitch: “You’ve got one shot and you either win or lose. So go with what works,” said Lanzano, referring to local TV.

And local TV executives haven’t been shy about pointing to what they say are the deficiencies of cable competitors, which have aggressively pressed for a share of the political pie over the last several election cycles. Lanzano contends that as satellite TV continues to add subscribers at the expense of cable, the latter medium “only reaches every other household in some markets and just 60 percent of households on average.”

But Andrew Capone, svp marketing and business development for cable sales firm NCC Media, counters that while cable may not reach every home in a given market, “that is more than off-set by the number of irrelevant homes that a broadcast signal reaches,” in most local races.

But the argument is almost beside the point, Capone said, noting that “there is a lot of money sloshing around out there right now and both local broadcast and cable will benefit greatly from it.”

That said Capone argues that cable systems, with their ability to serve ads town by town or county by county, “are uniquely able to target messaging in ways that broadcast just isn’t capable of doing.” With an array of niche channels, cable can offer “very targetable demographics” said Capone, “so we can go in and offer not just one TV station but 40 to 60 individual networks. It’s more efficient in terms of voters reached.”

And while the :30 second spot via the TV screen is still the dominant messaging vehicle for both broadcast and cable, new techniques are emerging. Capone said NCC is offering a new on-demand platform this year that enables candidates to offer longer form spots.

Dubbed My Government on Demand, it’s available in about 30 million digital cable households, he said. But only a handful of candidates have bought time on it so far, including (perhaps not unsurprisingly) Meg Whitman, the former eBay CEO who is running for governor in California.

And Lanzano reports that TV stations are in the nascent stages of developing online video offerings and digital sub-channel techniques that would help the medium target more effectively and provide longer-form alternatives to the :30 second ad. “But that’s really the future,” he said.

According to Borrell, local TV is likely to command 63 percent of this year’s political dollars, or about $2.7 billion. Cable and radio will each pull in about 9 percent of the ads or about $380 million and newspapers will attract about 8 percent of the pie or $330 million.

One surprise: a relative paucity of online spending this year: Borrell pegs it at just $45 million or one percent of the take. “If people had learned the lesson of Obama you’d think they’d be all over it,” said Cassino. “It’s surprising how little the candidates are taking advantage of anything beyond what their moms and dads would have told them to do.”

Meanwhile, analysts say to expect lot of negative campaigning through Election Day. “This is going to be one of the most negative elections we’ll ever see,” said Tracey. For the many incumbents under fire, he said, “the only path to victory is to tell people, “you may not love me but this other candidate is really bad.”

But beyond that, Tracey said, the prevailing mood across the country is one of anger, given the state of the economy, unemployment and the rancor that’s been expressed over the healthcare bill and other issues.

“Everybody is pissed,” said Tracey. And as a candidate, “you have to be angry right along with them.”