MAGNA, a leading global media investment and intelligence company, just released its expectations for advertising revenue for 2022 and 2023 projections.
The 2022 recap:
The US economy has been sluggish for most of the year, even before the Ukraine war, and will remain slow through at least mid-2023 (FY GDP growth +0.7%), while consumer confidence has hit a 20-year low (index 55) and inflation a 40-year high (8%). On the bright side, the job market is expected to hold next year (unemployment 4.2%) and inflation is expected to slow to just +3%.
In that environment, MAGNA expects several industry verticals and product categories to show flat or decreasing advertising spending in 2023: CPG and Finance will be among the most negatively affected. Entertainment/Media, Travel, and Betting will continue to grow under organic factors, while Automotive may finally grow again as supply issues gradually improve.
Meanwhile, political advertising spending grew by +66% over the previous mid-terms to generate $7.4bn in net incremental advertising revenues for media owners ($5.2bn for local TV groups, $1.1bn for digital media formats, etc.).
The US ad market lagged the economic cycle in 2022. Advertising spending kept growing in the first half, driven by the post-COVID momentum on consumer spending and mobility and the systemic lag created by the upfront media buying deals, while the US economy stalled into a “technical recession”: two consecutive quarters of (shallow) negative GDP growth. The economy re-accelerated in 3Q22 (GDP +2.6%), but that’s when ad spend stalled. Advertising revenues grew by +11% year-over-year in the first half of 2022 but slowed to just +6% in the second half. Half of that second-half growth came from political advertising; in other terms, non-political, non-cyclical advertising grew by just +3% in the second half over the same period of 2021.
On a full-year basis, the advertising market grew by +8% in 2022 to reach $318bn. Excluding cyclical spending around the 2022 mid-term elections, the Winter Olympics, and FIFA World Cup, the market growth would have been +6%.
Looking at key media types, total video advertising sales gained +7% in 2022, with national long-form video down -1% (linear national TV -4%, AVOD ad sales +18%), while local video gained +23% due to the impact of mid-term elections, and short form video (YouTube, Twitch) rose by +12%. Audio ad sales were up +5%, boosted by a +15% performance in streaming and podcasting ad sales. Cross-platform publishing ad sales dropped -4% as a -14% decline in papers was more than enough to offset the +5% growth in digital sales. OOH sales increased by an estimated +19% to reach $9.1 billion and surpass its pre-COVID market size, driven digital OOH ad units (+26%) and the belated recovery of the Transit segment (+60%). Although Cinema advertising doubled from 2021 as moviegoers returned to theaters to welcome the comeback of blockbusters like Top Gun: Maverick and Black Panther: Wakanda Forever, theater attendance and advertising sales remain -35% and -50% below pre-COVID levels resp.
Looking at digital ad formats, social media advertising crawled to a sudden halt in 2022, +1% to $62bn, compared to +38% in 2021, because of audience plateauing, pricing power that was hurt by the post-iOS 14 environment, and the rise of video snacking as a major consumption pattern. Search continues to be driven by the growth of ecommerce and is unaffected by the data privacy issues curbing the growth of display and social formats, with advertising sales growing +15% to $115 billion (largest ad formats with 36% of total ad dollars this year).
2023 advertising expectations:
For 2023, MAGNA now anticipates total ad spend to grow by +3.7%, one percentage point below the previous US forecast (Sept. 2022). Excluding cyclical ad sales in ‘22 and ‘23, growth in 2023 will be +5.8% i.e. barely below 2022 (+6.2%). Long-form video advertising will shrink by -8% as the lack of political spending will not be offset by the continued growth of broadcaster AVOD +32% and short-form video (+10%). OOH will continue to outperform (+7%) while audio and publishing formats will essentially stabilize. Search will remain strong (+11%) while social media ad sales will grow again but far slower than pre-iOS 14 growth rates (+5%).
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