TV Networks Fail to Capitalize on Facebook's Terrible Year

(Bloomberg) -- U.S. TV networks surrendered more than $1 billion in advertising sales last year, according to a study that suggests large media companies are failing to capitalize on scandals at online competitors Facebook Inc. and YouTube.

U.S. TV ad spending fell 1.5 percent to $70.2 billion in 2017, according to the research firm eMarketer, which projects further declines in 2018 and 2019. Digital ad spending, meanwhile, will climb 19 percent this year to $107.3 billion, the company said.

Facebook and Alphabet Inc.’s Google, the parent of YouTube, have struggled for more than a year with criticism that they disseminate misinformation, publish violent and inappropriate content, and fuel hatred and division. Yet advertisers are paying them anyway and shifting more dollars away from TV networks with problems of their own.

“As ratings for TV programming continue to decline, advertiser spending will also continue to see declines, especially in years that do not boast major events such as presidential elections and Olympic games,” said Monica Peart, eMarketer’s senior forecasting director.

Collectively, ratings for the big four U.S. broadcast networks are down 4.3 percent in the current TV season. Only Comcast Corp.’s NBC is up, buoyed by the Super Bowl and Olympics.

Weathered Threat

Television had weathered the threat from Google and Facebook better than most of their peers in media. Newspapers and magazines across the country have had to fire staff, and radio stations haven’t reported significant sales growth in more than a decade. The TV business managed to squeeze more dollars out of fewer viewers by charging advertisers higher fees and by raising the rates they charge pay-TV customers.

TV ad executives have been warning marketers that their online rivals are unreliable. Each time Facebook acknowledged miscounting video viewership or YouTube violated a copyright, TV networks would remind their partners on Madison Avenue.

The last year seemed to answer their prayers. Facebook has apologized time and time again for the way in which foreign countries, political actors and hatemongers have abused the world’s largest social network. The stock has fallen 18 percent since March 16. YouTube, meanwhile, has bumbled through one scandal after another, many of them angering advertisers whose commercials ran next to inappropriate content.

“Facebook has a real problem,” said Steve Burke, chief executive officer of NBCUniversal, which invested $500 million last year in Snap Inc., a Facebook competitor. “At the end of the day, large businesses are based on trust. When you do something that threatens that trust you have a problem,” Burke said Tuesday at an event with advertisers in New York.

The evidence for an online ad backlash and TV ad revival isn’t there, though. TV networks like Burke’s NBC are pledging to air fewer ads to try and retain more viewership. Yet, the audience for live TV has been declining for years.

TV, once the dominant medium for advertising, will account for less than a quarter of all ad spending by 2022, according to eMarketer. Google and Facebook, meanwhile, are projected to add more than $15 billion in sales each, almost all of it advertising.

To contact the reporters on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net, Gerry Smith in New York at gsmith233@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum, Alistair Barr

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