By Michelle Jones
The overall U.S. advertising industry was better than expected, but not all companies equally benefited. Unsurprisingly, Facebook (FB) and Google (GOOG) dominated as digital advertising is going strong. Interestingly though, while TV ad spend was higher than expected, Twitter (TWTR) and Yahoo (YHOO) still managed to lose out compared to TV advertising even though they’re in the digit segment.
Ad spending on the rise
Morgan Stanley analysts Benjamin Swinburne and Brian Nowak and their team analyzed the entire advertising industry through the lenses of companies’ third quarter earnings results and found some interesting trends. Total U.S. ad spend ran counter to expectations of a decline. The analysts found a 3% to 3.5% increase in total ad spend, while expectations have been declining for the last year.
They believe the U.S. ad industry is actually “healthier than the overall economy,” at least for now. The two media standouts they discovered were TV and paid search. Also North American ad agencies saw strong growth during the third quarter with IPG and OMC leading the way.
Online advertising drives strength at Facebook, Google
The Morgan Stanley team discovered that online advertising increased by about 18.8% year over year, beating their estimate of 17.6% growth. They said search, mobile display and online video led the way, which clearly shows why Google and Facebook did so well during the third quarter.
Google’s paid search in the U.S. increased by about 13%, coming out ahead of expectations at 11% growth and the previous quarter’s 11% growth rate. The analysts said the main drivers were an acceleration in mobile ad growth due to more ad coverage and improvements in the gap between mobile and desktop monetization. They estimate that growth in YouTube ads was at 50% or more year over year.
Facebook reported $2.1 billion in North American ad revenue, a 56% increase from last year. The Morgan Stanley team noted that the social network benefited significantly from growth in Instagram advertising and new ad products like video and carousel ads.
