Agency Magna Global ups YouTube spend by 5x, stealing from TV budget

Magna Global, which is part of agency holding company IPG, has signed an ad deal with YouTube that shifts roughly $250 million from traditional “linear” TV to the video site over the course of the next year. According to the The Wall Street Journal, the ad buys will run on Google Preferred, which aggregates ad inventory associated with premium content on YouTube.

The report asserts that the Magna Global buy constitutes a roughly 5x increase over what it spent on behalf of clients on YouTube in 2015. The increased YouTube spending was motivated in part by, frustration it appears. The WSJ quotes David Cohen, president of Magna Global North America, saying that media buyers are unhappy with TV’s declining ratings without commensurate reductions in ad rates.

Monetheless, most brand advertisers are reluctant to quit TV. Indeed, the $250 million is still only about five percent of the total Magna Global spends on conventional TV advertising on behalf of clients.

Despite the fragmentation of TV audiences across platforms, the medium is familiar and remains popular with brands. Research shows, however, that conventional TV advertising is less effective than digital media for some segments, such as Millennials.

Data aggregator eMarketer forecasts that digital video spending in the US will be roughly $9.5 billion this year, rising to nearly $11.5 billion next year. By comparison, total TV spending in the US is just over $70 billion. Digital ad spending (all formats) is projected to overtake TV next year, according to the firm.

Video is increasingly the digital ad format of choice for publishers and brand marketers. It’s arguably the most versatile format available and can translate across platforms relatively easily.

In its quest to capture TV budgets, YouTube faces growing competition from Facebook, Twitter, Snapchat and Pinterest, which have all introduced video and are vying for many of the same ad dollars. Facebook, in particular, presents a very competitive challenge to YouTube for brand advertising.