Donald Trump’s candidacy has been a ratings godsend. What’s still uncertain is whether it will boost or deflate political ad spending through the rest of the year.
The U.S. political cycle drives two spikes in advertising every four years: a large one during presidential campaigns and a smaller but still significant bump in even-numbered years that have congressional elections. These peaks in spending are enough to drive more than a quarter of total ad revenue during election years for some owners of broadcast stations, which get the lion’s share of political ad expenditures.
With a lame-duck president and long primary races on both sides, this year’s race has had the potential to drive massive ad spending as campaigns have heated up and stayed hot. The 2016 race has already generated substantially more revenue for station owners than the Obama-Romney campaign did four years ago. Four station owners — Nexstar, Meredith, EW Scripps, and Sinclair — minted $103 million from political ads from Q1 2015 through Q1 2016; the figure during the corresponding period for the earlier campaign was just $38 million. Moreover, the lengthy battle between Hillary Clinton and Bernie Sanders likely boosted spending at least a bit during Q2.
The bigger question is whether we’ll see any pivot in Trump’s ad-spending strategy from the primary to the general election. He has spent a fraction of the amount laid out by either of his Democratic opponents and several of his erstwhile competitors for the Republican nomination. The conventional wisdom suggests that the free airtime he attracts as a result of his controversial remarks is bad news for ad spend.
When Trump does spend on traditional advertising, he does so in a more targeted way than his opponents, with the intention of influencing key groups of voters in specific geographic areas. Given the rise in addressable advertising technology, it’s likely we’ll see candidates opt for more of this surgical spending, rather than blanket advertising, as we approach the general election.
There still may be a bump in spending from congressional candidates on the Republican side, concerned that voters lukewarm on Trump may not turn out at all. Also in play are super PACs, which could add meaningfully to a mix that already includes direct spending from candidates and their parties.
Overall, the TV industry appears to be banking on record spending throughout the rest of the election, but there seems to be plenty of cause for caution on that front. We may yet see a disappointing haul for station and network owners.
Jan Dawson is the founder and chief analyst at Jackdaw Research, an advisory firm for the consumer technology market.