The presidential campaign of 2004 will be remembered, for better or worse, as the one that blew away all previous records for advertising spending. For some local TV stations, this meant a financial windfall, though the distribution of political money was far from even. Certain markets were bombarded with advertisements from the primary season straight through Election Day, while others saw virtually no presidential campaign ads and few in local contests.

In 2004, an estimated $1.6 billion was spent on political advertising on local television - an unprecedented avalanche of money from candidates and outside groups.

The amount should be kept in perspective. Altogether, political revenue (including congressional, gubernatorial, and local races) is still a small - though increasing - portion of total local TV station revenue. The segment grew from 2.3% in 2000 to 2.9% in 2002.¹¹ In 2004, political ads were expected to account for 6.1% of all station revenue, based on estimates of political ad spending and total revenue.¹² By comparison, automobile companies and auto dealers typically account for more than a fourth of station revenue.¹³

Though small in overall terms, in a time of shrinking audiences and economic uncertainty, the reliability of a biennial infusion of political dollars is something local TV stations cling to as firmly as possible. Stations are required by law to offer candidates their lowest rates for commercials, but those rates come with the stipulation that ads might be preempted to a different time slot if another advertiser is willing to pay more money for the airtime. Because campaigns want to reach a specific audience watching a specific show, they generally end up paying higher rates to guarantee their ads will be seen when they want.¹⁴ TV companies have fiercely resisted calls for mandatory low advertising rates for non-preemptible political ads, as well as other requirements that might be imposed by the FCC as regulator of the public airwaves.¹⁵

Political Ad Revenue

Source: TV Bureau of Advertising (political ad revenue, 2000 and 2002); Morgan Stanley estimate (political ad revenue, 2004); Veronis Suhler Stevenson (total local TV revenue, 2000-2004)

Another important element is that political advertising has gradually migrated in the last quarter-century to become the nearly exclusive domain of local stations, not something that benefits the national TV networks. As the ability of campaigns to target where undecided and swing voters lived, down to their congressional districts and voter precincts, campaigns learned to match their targets to TV markets and to buy their ads just in those key areas. One Morgan Stanley analyst estimates that network advertising declined from 25% of TV political ad spending between 1972 and 1992 to less than 1% in 2000.¹⁶

Presidential campaign advertising has become just another kind of national spot advertising. The emphasis on local spending has been particularly apparent in recent years, as ad-buying strategies have become more refined and the race for president has narrowed to a few key battleground states the campaigns start targeting early. For example, in the first half of 2004, according to Nielsen Monitor-Plus, Bush and Kerry spent $63.7 million on ads, over three times as much as Bush and Gore at the same point in 2000 ($18.6 million).¹⁷ By the end of 2004, presidential campaign advertising in the 100 largest markets amounted to $587 million dollars, with the Bush campaign accounting for 31%, the Kerry campaign 27%, and outside groups 41%.¹⁸

Presidential Campaign TV Ad Spending, 2004

Design Your Own Chart

Source: Los Angeles Times, “Silence of the wolves, and their ilk, in swing states,” November 2, 2004

* General election campaign only.

Meanwhile, the small number of contested House seats led to a concentration of campaign spending in districts with the potential to tilt from one party to the other. Media buyers for the campaigns identify which TV markets match up with the battleground districts and then bombard those markets with campaign ads.

Many of those ads, moreover, are bought during local news time.

For years in politics, the conventional thinking was that political ads were best placed around local news, for two reasons. First, social science research found that if people saw ads in or around local news, they might think the ads were more credible - indeed they often thought the ads were actually news stories. In earlier years, ad makers even tried to make their ads look like TV news to add to the confusion. The second reason ad buyers liked buying during news slots is that local news hits the right kind of viewers. If people were watching the news, that meant they were interested in public affairs and had a high probability of being voters.

It turns out that local news still holds particular appeal to campaigners as a venue for their advertising. The Wisconsin TV Ad Project, a research initiative to track campaign ad spending on local television, found that approximately 40% of political ad spending in the spring of 2004 went to ads aired during local news programs.¹⁹

TV Revenue from Political Ads

Presidential campaign years, 1972 to 2004

Design Your Own Chart

Source: TV Bureau of Advertising (1972-2000); Morgan Stanley estimates (2004)

While some TV markets were cashing in on political spending throughout the year, others were left out entirely. An analysis of presidential campaign ads in the top 100 markets through mid-October found that 87% of ads were aired in markets reaching just 27% of the electorate.²⁰

But the uneven pattern lessened as political candidates in non-battleground states began airing ads in the summer and fall. For example, in South Carolina, a reliably Republican state in the race for president, Democratic candidate Inez Tenenbaum spent some $3 million on television ads in her unsuccessful race for the U.S. Senate.²¹ On the other hand, in California, which went for John Kerry by a strong margin, the Republican candidate for the U.S. Senate, Bill Jones, never ran a single television ad.²²