Key Questions: Behind the Commercial Break: What Does Ad Spending Tell Us About the US Consumer?

Picture this: You’re sitting on your couch on a Saturday evening, watching your favorite movie. The action pauses, and suddenly, an ad pops up—maybe it’s a sleek new car cruising down a winding road or a flashy tech gadget promising to make your life easier. You might sigh and reach for the remote, or perhaps you’re intrigued enough to keep watching. But have you ever wondered what’s really happening when these ads play?

Behind the scenes, companies are making strategic bets on where you’ll spend your money next, based on what they believe you value most right now. As the latest earnings reports roll in, we can take a closer look at these bets and what they reveal about the current state of the economy.

As earnings season wraps up, reports from advertising-driven companies like Meta, Google, The Trade Desk, Pinterest, Snapchat, and Reddit, along with ad agencies such as Omnicom and broadcast TV operator Nexstar, provide a comprehensive snapshot of the current economic landscape. Advertising spend serves as a powerful indicator of business confidence and consumer sentiment, as companies adjust their budgets based on anticipated demand and economic conditions. This quarter’s results offer key insights into which sectors are resilient and where caution is taking hold.

Ad spending often serves as a barometer of economic sentiment reflecting how businesses anticipate consumer behavior. This quarter’s results reveal a cautiously optimistic picture, with overall ad spending growth pointing towards a potential soft-landing for the economy. However, variability across platforms and ad channels reflect different trends in verticals, highlighting shifts in consumer preferences and spending priorities.

Ad spend levels varied across similar verticals, reflecting unique market dynamics and shifting consumer priorities. The Trade Desk reported strong demand in healthcare and home & garden, while Meta experienced growth in online commerce and healthcare. Pinterest saw strength in retail, financial services, automobiles, and technology, though growth was offset by softness in the food and beverage subsector due to industry headwinds. While some discrepancies stem from platform-specific factors, the broader trend highlights consumers’ focus on essential and lifestyle-enhancing categories, with caution in discretionary spending.

Healthcare, financial services, and home improvement saw robust ad spending across platforms, pointing to consumer preference for essential services and products that enhance daily life. The Trade Desk’s performance in healthcare ads and Pinterest’s strength in retail and financial services are signs of sustained demand, despite economic uncertainty.

In contrast, discretionary verticals like technology, entertainment, and retail reported weaker demand, particularly in brand-oriented formats. Snapchat, for instance, noted a decline in brand-focused ad revenue, indicating softer demand from consumer discretionary segments, as shoppers prioritize value and necessity over luxury items.

The momentum toward digital and performance-based ads remains strong. Google, Meta, and The Trade Desk reported growth driven by enhanced targeting and high-ROI formats. Meta’s 11% increase in ad pricing and Google’s strong search ad performance, especially in retail and financial services, reflect a preference for measurable outcomes.

Political ad spending notably boosted Nexstar’s revenue, with a 22% increase largely driven by campaign ads. However, Nexstar expects non-political ad revenue to decline at a low double-digit percentage in Q4, as political ads displace other advertisers, underscoring challenges for traditional media compared to digital platforms that maintain consistent demand.

Omnicom highlighted that business conditions align with a soft landing scenario, mirroring the broader trend seen across most ad-driven companies. Despite challenges in certain discretionary categories, ad spend growth suggests businesses are adapting strategically, focusing on high-performing channels while cutting back in weaker areas.

Strong spending in healthcare, home improvement, and essential services indicates a focus on enhancing quality of life and meeting fundamental needs. This trend points to a resilient middle- and upper-income consumer base, while lower-income segments may continue to face tighter constraints.

Companies like Reddit and Pinterest reported significant growth in international markets, particularly in the EMEA region. This regional strength suggests diverse economic conditions, with some global markets recovering more quickly or exhibiting stronger consumer demand. Reddit’s 57% growth in international revenue and Pinterest’s 20% growth in Europe underscore the potential for ad platforms to tap into emerging opportunities outside the U.S.

Overall, the current state of ad spending indicates a cautiously optimistic view of the economy. Despite challenges in discretionary spending and traditional media, the resilience in digital channels and essential verticals suggests a potential soft landing scenario. Businesses appear to be adapting their strategies, focusing on performance-driven marketing, prioritizing high-ROI channels, and adjusting their budgets in response to shifting consumer priorities.

For investors, these trends offer some valuable insights into which sectors may continue to show strength and where caution may be needed. Continued monitoring of holiday season ad spend and shifts in consumer behavior will be critical for assessing economic sentiment as we move into 2025.