Analyst: Ad Market Might Not Be So Bad After All

National TV advertising rose by about 3.6% in the first quarter, adjusting for the Olympics, according to analyst Brian Wieser of Pivotal Research.

That’s pretty strong growth considering the downbeat tone of the marketplace following a 2014-15 upfront that was down somewhere in the 5-% to 6% range.

“While we can’t specifically translate these figures into specific outcomes for the coming upfront, they do seem to highlight that positive momentum reduces the chances of another negative year,” Weiser said in a report Friday. “They also serve to highlight the limited relationship between Upfront and full year activity.”

Spending was down 2% in the fourth quarter of 2015, and while some industry execs have said on earnings calls that demand appears stronger, Wieser calls the current scatter market tepid and thinks second quarter could turn out flat.

“While we think this upfront won’t be as negative in volumes as last year, there is still some reason for concern for those rooting for the long-term health of TV advertising,” he said. “Marketers’ cost-focus can play to television’s advantage given its relative effectiveness in driving business results for larger brands vs. most digital alternatives, but we think this has been overwhelmed to some degree by false perceptions on the notion that digital advertising can consistently do more for less, paired with ‘bright shiny object’ syndrome.”

Wieser notes that live viewing continues to decline. And streaming VOD services like Netflix are creating original programming and siphoning off eyeballs. A shortage of supply could push the price of TV ads above where marketer value them.

Ultimately, television advertising’s long-term health is dependent upon the presence of broadly-targeted advertisers who seek to differentiate themselves on the basis of awareness of brand attributes,” Wieser said.

“As brands mature, awareness tends to become less important and narrow targeting becomes both more important and more efficient,” he said. “Mass market brands are seemingly losing shares in their categories in favor of micro-brands, for whom digital media can be uniquely effective given potential for targeting niche audiences and lower absolute budget requirements. Towards that end, long-run fears around the health of TV advertising might not be wrong, but we’re still a ways away from those concerns becoming fully realized.”