Midterm political spending throws spanner into regional advertiser holiday plans

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Some $8.2 billion of the total $12 billion expected to be spent in the run-up to the midterm elections in November will go towards TV or CTV, according to AdImpact. 

Inflation and pre-emptives

That investment has led to price inflation and a rise in CPMs for brands attempting to buy ad space in states like Texas, the site of a close race between Democrat candidate James Talarico and Republican Ken Paxton.

Political ad spending has had “a huge impact” on local and regional advertisers, according to Jacqueline Hoyos, chief media officer at Dallas-based full-service agency Moroch Partners.

“There’s no like doubt about it, and it really doesn’t matter what day part you’re buying,” said David Hassard, co-founder and managing partner at Electric Symphony Media, a New York-based agency that handles both political and non-political clients across the U.S.

In Texas, Hassard said the company had found linear CPMs typically rising 10%-15%, with some programming commanding price increases as high as 30%-50% in recent weeks. 

While linear is the channel most affected by price inflation, demand currents unleashed by the midterm races have impacted streaming prices too.

Nola Ladd, awareness media supervisor at Minnesota media agency Collective Measures, told Digiday the company had seen average premium CTV and streaming CPMs rise from $34-35 to $43, depending on which locations advertisers were attempting to target. “It’s an indicator of the rising competition in that space,” she said.

While national advertisers can choose to ignore a state or DMA with inflated ad costs until the election’s over, regional or local advertisers don’t have the same flexibility. “When you’re a local advertiser and you’re really focused on audiences and geo-targeting, it does impact scale,” added Hoyos.

One Texas grocery client, she said, had found itself pushed out of live college football coverage in September by political clients. Remaining ad slots were already sold out, due to the fervor of political advertisers.

Advertisers are able to buy up the inventory they want in advance — high political ad spend has not come as a surprise, after all — but local and regional TV providers often institute “pre-emption” clauses in contracts. In basic terms, they allow media companies to bump regular advertisers for political ones, if a campaign or PAC is willing to pay more than a brand.

“In Wisconsin, there has been a lot of preemptions for our clients,” said Ladd. While it doesn’t cost the advertiser outright — brands typically receive make-good inventory — it can disrupt campaign planning and lead to ads going out on sub-optimal inventory.

In turn, Ladd said that’s fueling a flight of advertisers to perceived safe haven options like Netflix, Amazon Prime Video and Disney+, which don’t allow political advertising. But the increase in demand from skittish marketers seeking brand safety is, in turn, pushing up prices on those platforms — which are already at the top end of the streaming market for average CPMs.

“If news is essentially shut down because of political, then even if you find other homes, you’re now competing against people that typically wouldn’t be [there],” said Hassard.

The issue has meant media planners and buyers must spend longer searching for useful, non-inflated ad inventory available in market — and it’s slowed campaign rollouts, as clients ask agencies for additional reviews of creative to ensure their ads don’t inadvertently comment on an election contest.

The problem isn’t limited to television. Political ad dollars are also flowing towards social platforms, as well as YouTube, in the lead-in to November 3rd.

One media agency exec, who exchanged candor for anonymity, told Digiday they had registered a 20% increase in the average YouTube CPM in recent weeks, a likely consequence of political clients leaning into the video platform.

Political clients spent $149 million on YouTube and Meta in the week beginning October 11th, up from $34 million in the final week of July. $97 million of that went to Google, with 95% in the form of video ads on YouTube, according to data firm AdsMom. 

The company estimated that Texas, Ohio and Michian saw the highest amounts of political ad dollars, with the Lone Star state drawing in $34.5 million between October 1st-17th.

Go dark – or go harder?

PMG’s head of emerging services Natalee Geldert told Digiday that the agency, which has offices in Austin and Dallas, Texas was advising clients to avoid regions currently dominated by close electoral races, such as Pennsylvania, Iowa or Michigan. 

“We’re suggesting they lean out of specific DMAs or even states, because there’s so much volatility from the political cycle,” she said.

In some cases, regional advertisers with enough of a war chest are moving up a tier and buying national inventory, which has been less vulnerable to political ad spend-related inflation, according to Hassard.

“There’s really no reason to compete in a local level if you have a footprint that affords you like and a budget that affords you that opportunity,” he said.

Advertisers without that financial room for maneuver, or happen to operate solely within states hosting contentious races, face a starker choice — pony up for higher prices, or switch off TV advertising entirely. Hassard said some of ESO’s clients had “gone dark” on linear activity until the election is over, but added that it was a minority position. 

Despite the higher prices, going ‘dark’ entirely represents an extreme option for advertisers during Q4. “That is really hard to come back from,” said Geldert.

That means, at least for the next two weeks, local advertisers are left choosing between a rock and a hard place.