Political White Paper – United States Midterm Elections 2018

By Grant Rosenquist
Senior Vice President, Media Insight & Planning

 

EXECUTIVE SUMMARY

 

We’re only a few weeks away from the 2018 General Election.

This year, 11 U.S. Senate, 16 Gubernatorial, and 100 U.S. House of Representative contests have been flagged ‘Highly Competitive’ by pundits. Media markets like New York, Los Angeles, and Philadelphia will be among those most-impacted by campaign spending. The Arizona, Florida, Ohio, and Texas markets will be affected as well.

Every year, Direct Response advertising campaigns must adapt to the primary and general election campaigns for national and local elections. This year it’s a mid-term election, which usually are referendums on the current administration. Add to that a high number of elections for offices whose occupants are not a candidate for re-election, combined with campaign fund-raising that has reached record levels. These are challenging times indeed.

Advertisers who did not plan with these challenges in mind risk severe disruptions in leads or sales response. Those who did are usually those who make a habit of tracking previous elections and carefully applying those lessons.

This white paper describes how political advertising ramp and peak during the last few days before an election but begins as early as fourteen weeks before the polls open. For network affiliate stations, those ads can account for 30% of daily station inventory. That necessitates a set of best practices to cope in this environment. We describe how InterMedia plans, negotiates, and books campaigns well in advance while incorporating our proprietary media assets, CPM Network®, and MediaPoint Network®.

THE US HOUSE OF REPRESENTATIVES

 

Members of the U.S. House of Representatives serve two-year terms, and the election for the 116th Congress is this coming November. All 435 House seats are up for election or re-election.
As of Monday, September 18, Cook Political Report considered 30 of these races to be ‘toss-ups.’ [1] Additionally, Cook rates another 36 as ‘Leaning’ for either Democratic or Republican candidates [3] and flags another 34 as “Likely” Democrat or Republican victories. [2]

Philadelphia seems to be the market most affected by House races. The market will host noteworthy contests in six congressional districts [4]: NJ-02, NJ-03, PA-01, PA-06, PA-07, and PA-08. New York follows with five districts: NJ-11, NY-01, and NY-11, while sharing NJ-02, and NJ-03 with Philadelphia. Los Angeles has four key districts: CA-25, CA-39, CA-45, and CA-48 and shares CA-49 with the San Diego DMA. That market is also home to the race for the California 50th Congressional District, which is another contest of national interest.

Cook considers the remaining 329 House races to be ‘solid.’ [5] Those campaigns are likely to spend money on advertising, but not with the urgency as candidates in Toss-Up, Likely, or Leaning House races.

THE SENATE

 

35 Senate seats will be decided this year, including the one-third of the Senate making up Senate Class 1, plus openings in Minnesota and Mississippi. The Cook report is calling eight Senate races Toss-ups: Arizona, Florida, Indiana, Missouri, Nevada, North Dakota, Tennessee, and West Virginia. Cook puts three Senate races into the ‘Leaning’ category: Minnesota, Ohio, and Texas. Seven Senate races are considered “Likely”: Michigan, Mississippi, Montana, Nebraska, New Jersey, Pennsylvania, and Wisconsin.

Texas markets (Austin, Dallas, Houston, and San Antonio) will face the highest pressure. Florida is next in line (based on early data from Jacksonville, Miami, Orlando, and Tampa), followed by Arizona (Phoenix and Tucson). Indianapolis and Kansas City are likely to see heavy political buying as well.

THE GOVERNORS

 

36 states will either elect or re-elect Governors this November. The Cook Political Report considers nine of these to be ‘Toss-Ups’: Connecticut, Florida, Georgia, Iowa, Kansas, Maine, Nevada, Ohio, and Wisconsin. Seven of these states have open seats with no incumbents.

Broadcasters are not required to extend FECA [6] rate protection given to non-federal election campaigns, but local stations usually ex-tend that courtesy to Gubernatorial races. Spending by these candidates will combine with that by Senate campaigns in Florida and Wisconsin to heat up demand in those markets. Other areas, such as Georgia and Kansas, fare better and will not be complicated by House or Senate races.

“Advertisers who did not plan with these challenges in mind risk severe disruptions in leads or sales response.”

 

 

THE IMPACT

 

Our key metric is 30-second equivalent ads. We are primarily concerned with the impact on station inventory by political advertisers, and this data accurately reflects the quantity of airtime lost by Direct Response and General Market advertisers. Our source is Nielsen Ad Intel Competitive Media Reporting for the period beginning Monday, August 1, and ending Sunday, November 5, which was the last full-week of advertising before the 2016 general election. We focused on the top-50 U.S. television markets.

During that 14-week period, Nielsen detected 942,700 30-second equivalent ads for political candidates or ballot measures. That’s an average of 1,346 per week or 192 per day in each DMA. Activity in-creased during the last 3-weeks, beginning October 17, political advertising across the top-50 markets averaged 2,960 ads per week or 423 ads per day. Moreover, during the final week of the campaign season (beginning Monday, October 31), that average increased to 3,685, driving the average daily total to 526 messages every 24-hours.

Across these markets during those 14-weeks, political ads represent-ed 7.75% of total station inventory. By the last 3-weeks of campaigning, that demand more than doubled to 17.20%. During the final week, campaign ads amounted to 21.8% of all avails.

But all demand is not created equal. Political consultants and media buyers prefer local news broadcasts, which means ABC, CBS, and NBC affiliates get hit the hardest.

Over 14-weeks, campaign advertising represented 12.65% of all ads running on the three network affiliates. From October 3 onward, that increased to 23.36% of station inventory. By the final week before Election Day, it’s 34.7%, meaning that more than one in three ads was for a candidate or ballot measure. That includes almost every ad running during Morning, Mid-day, Evening, and Late News broad-casts. All three averaged of 324 30-second equivalents per day. Add in the FOX affiliates, where demand was lower (8.07% over 14-weeks), and that 4-network group averaged 509 ads per day.

That leaves the group consisting of Independents, the CW, ION, and the DigiNet affiliates. [7] They lost only 3.31% of inventory, but during the final week of October 31, that number rose to 9.71%. There was slightly more demand on Spanish Language inventory, which ac-counted for 11.32% of Hispanic station avails.

 

LOCAL CABLE ADVERTISING

 

The Bush 2004 re-election campaign media team, led by Mathew Dowd and Mark McKinnon, broke with tradition and ran ads across a wide range of Broadcast and Local Cable media based on their ability to target Republican voters. The campaign used Scarborough Re-search to identify specific TV programs and cable networks in response to GOP market research showing that traditional TV news buys were more likely to reach committed Democratic voters than Republicans.

“…all demand is not created equal.”

 

The Bush strategy was a game changer. The Cable Industry Association (then known as the CAB, now known as the Video Advertising Bureau) and Multi-System Operators (MSOs), committed themselves to preaching the gospel to national campaign committees and consult-ants. Their work over the following offseason, and over the coming years, increased the importance of Local Cable in the media mix. Campaign spending on Local Cable ads grew with each successive election.

During the 14 weeks running up to the 2016 General Election, Nielsen detected 240,234 30-second spots in 45 of the top-50 DMAs. Half of those ads played on CNN, FOXNC, TNT, ESPN, and HGTV; the rest appeared across 58 national or regional networks. The combination of fewer ads and a broader network mix mean that Political advertising consumes only 3.54% of local insertion inventory. That’s 381 ads per week in each market or 54 per day.

Although the numbers aren’t as high, political advertising on Local Cable TV increases as election day draws closer, just like on Spot TV.

The most significant concentration of ads ran on news channels like CNN, Fox News Channel, MSNBC, as well as local or regional news networks. Over 14-weeks, campaign ads accounted for 5.69% of News inventory. That rose to 12.19% during the final week, October 31, 2016, which was 265 ads per week, or 38 per day.

General entertainment networks like A&E, HGTV, TNT, and USA, were well-used for election campaigns. Here, buyers scheduled 26 ads per day, or 178 ads every seven days. Schedules then increased to 539 ads per DMA or 77 per day over the last week.

The (relatively) low level of political advertising on Sports networks surprised us. ESPN ran the most, over half of all ads on Sports net-works, with the rest appearing across 31 FOX or other regional sports networks. Campaigns used only 1.71% of total sports inventory during the first 13-weeks (about eight per day), then 4.61% during the last week, or 21 per day.

LOOKING FORWARD

 

Local TV markets will tighten by the week of October 8, 2018, and then get worse. DR advertisers who do not require steady lead or sales volumes will have the greatest flexibility; they can pull back from heavily congested markets, stations, and dayparts, maintain in-vestments in Daytime, or Overnight programs or on Independents and DigiNet affiliates, and wait for it all to blow over.
On the other hand, advertisers who must hit weekly goals must pay the cost for stations and time periods impacted by campaign spending. Short-term profitability will take a hit, but smart brands accounted for this in their 2018 business plans.

“…political advertising on Local Cable TV increases as election day draws closer…”

InterMedia’s approach begins in June, well in advance of the November General Election. We start with dynamic testing, measuring which combinations of media and creative can reliably overcome up-coming rate increases. When possible, InterMedia recommends pulling dollars forward – spending more dollars during the early days of the election campaigns. One of the benefits of our longstanding relationships with media partners is our reputation as a tough but fair partner; we negotiate aggressively, book early, and lock in buys well before we expect challenges to begin. InterMedia works hard to make sure that our client’s schedules stay up and running. It’s some-thing we do every week of the year, elections or not.

CONTINGENCY PLANNING

 

Good strategists factor a range of possibilities when planning. Stu-dents of the art of strategy learn very early on that success is some-times a matter of expediency; the ‘guy with the best Plan B wins.’ InterMedia proprietary media assets like CPM Network® and MediaPoint Network® are often ideal solutions to tight inventory markets during a political crunch – the perfect Plan B.

CPM Network® aggregates inventory from Multi-System Operators across the United States. Rather than battling the marketplace for general market avails, we fill orders using unsold inventory left over from partial-system or zoned buys. Schedules can be ordered to run in specific markets, on the same networks used by national or regional advertisers, with complete daypart flexibility.

MediaPoint Network® is performance media. Schedule cost is based on how many leads or sales were delivered, not by how many ads ran. Campaigns appear on broadcast affiliates, as well as Cable net-work, DigiNet, and Satellite affiliates. Our media partners code these schedules as ‘if available’ inventory, which exempts them from Federal regulations. This means MediaPoint Network®, in combination with CPM Network®, gives InterMedia clients access to station inventory, even when other advertisers have problems clearing their buys.

FINAL NOTES

 

Understanding the challenges set into motion by political campaigns requires careful analysis of history and marketplace dynamics. We pour through the data so we don’t have to ask our media partners “what’s going on?”

Advertisers who sail headlong into the 14-week, August – November season without understanding what can, and probably will happen, are doomed to suffer. InterMedia has been tracking election spending trends since the 1990’s. We know how to cope and thrive when money pours into markets, the races heat up, and inventory conditions change on an hourly basis. We consider it part of our fiduciary, and professional responsibility to InterMedia clients.

 

 

 

 

 

[1] These are the most competitive; either party has a good chance of winning. The Cook Political Report, https://www.cookpolitical.com/presidential/charts/scorecard, accessed September 21, 2018
[2] These are considered competitive races, but one party has an ad-vantage. Ibid.
[3] These seats are not considered competitive at this point but have the potential to become engaged. Ibid.
[4] Please note the numbers listed refer to Congressional districts.
[5] These races are not considered competitive and are not likely to be-come closely contested. ibid
[6] The “Federal Election Campaign Act (FECA) of 1971,” as amended, the “Presidential Election Campaign Fund Act,” as amended, and the “Presidential Primary Matching Payment Account Act,” as amended, as codified in titles 26 and 52 of the United States Code.