Despite Economic Headwinds Agencies Forecast A Strong Ad Market For Second Half In The Year

Three prominent global ad agencies Zenith, MAGNA and GroupM all recently released updated midyear forecasts of the ad market covering the latter part of 2022. Despite economic concerns such as inflation, the price of gas, a bear marketplace, the Russian invasion of Ukraine and talks about an impending economic recession, agencies see continued overall growth in ad spending in the aftermath of the global pandemic.

Besides the Winter Olympics, other cyclical events that will grow revenue will be the U.S. midterm elections, expected to be the costliest with estimates in the $8-$9 billion range for political ads. In addition, immediately following the election will be soccer’s FIFA World Cup originating from Qatar. For the first time the World Cup will take place during fourth quarter.

Zenith: Zenith forecasts ad growth in the North America market in 2022 to continue at +12% from the previous year. For the U.S. market, Zenith projects an increase of $33 billion in ad dollars, with the growth being driven by digital sectors. Digital will account for 57% of the incremental increase in ad dollars for the year.

In the U.S. linear television will continue its sluggish growth in ad spending. Zenith forecasts an annual growth of 1.1% through 2024. The sustained ad dollars will come from increased pricing which will offset the continued loss in audience. The continued erosion of viewers however, will prompt brands to increase their digital media commitment away from traditional television. Zenith expects television’s share of total ad spend to drop from 24.6% in 2021 to 20.8% in 2024.

In a statement, Jonathan Barnard, Head of Forecasting, Zenith says, “Online video is growing by creating new opportunities for building brand awareness, complemented by social media’s capacity for cost-effective targeting with low barriers to entry.” Barnard continues, “Online video is steadily narrowing the spending gap with television, and will be half as large as television by 2024.”

Globally, in 2022 Zenith expects an increase in ad spend of 8% and reach (US) $781 billion. India will be the fastest-growing global market increasing by 21%. By 2024, Zenith expects globally online video driven by connected TV and more ad supported streaming video opportunities will be the fastest growing digital segment replacing social media. Global ad spend for online video is expected to rise from (US) $62 billion in 2021 to $95 billion in 2024.

MAGNA: In MAGNA’s revised forecast, the U.S. ad market is expected to grow year-over-year by 11.1% reaching an all-time high of $326 billion. This is slightly lower than MAGNA’s previous forecast of +12.6% issued last March. Economic factors were the reason cited for the revised forecast. Looking at product categories MAGNA expects robust growth from two sectors severely impacted by the pandemic, entertainment and travel to have a particularly strong year. Sports betting is expected to become a major product category. In total, the U.S. accounts for 40% of global ad spending.

MAGNA projects cross-platform video ad dollars will increase by 8% for the year reaching $89 billion. The ad spending for linear TV estimated to be $38.6 billion for the year, a drop-off of 4%. Growth will come from AVOVO
D (+22%) short-form pure players (+19%) and local TV benefitting from political advertising at +19% accounting for the remaining $51.9 billion.

After a robust 2021, MAGNA projects slower growth for two leading digital categories; search and social media. Nonetheless, for 2022 MAGNA expects pure play ad spend to reach $195 billion, an increase of 14% from 2021. Ad dollars for search will total $116.7 billion (+18%) and social media to reach $67 billion (+11%).

Looking at other ad supported media, MAGNA forecasts audio ad spend (including over-the-air, streaming and podcasting) will increase by 5.7% this year and total $16.8 billion in 2022. The ad spend for out-of-home will surpass the pre-COVID high of 2019 and total $8.5 billion (+16%). Direct mail will benefit from political dollars and increase 2.6% to $17.6 billion. Ad dollars for cross-platform publishing will continue to struggle dropping 3% to $16.2 billion.

Globally, MAGNA forecasts ad spending revenue to grow +9.2% in 2022 totaling (US) $828 billion MAGNA reports this will be a 32% increase from the pre-pandemic total of 2019. The agency revised its global forecast downward from +12%. MAGNA cited two factors for the revised estimate, the worldwide economic slowdown and the rising limitations of data-driven targeting negatively impacting digital advertising.

Looking at regions MAGNA sees stronger growth in North America and Latin America markets at +11% and +10% respectively. Conversely, the EMEA (Europe, Middle East, Africa) market will grow by +7.5. MAGNA cites the war in Ukraine, energy costs, supply-chain issues, slowdown of Chinese imports among other reasons for the smaller increase.

In statement, Vincent Létang, EVP, Global Market Research at MAGNA and author of the report, said: “Most of the headwinds facing the advertising market this year were expected: economic landing following a red hot 2021, continued supply issues generating inflation, and mounting privacy restrictions slowing down the growth of digital ad formats. On top of that, the war In Ukraine now exacerbates inflation and economic uncertainty. Nevertheless, MAGNA believes full-year advertising revenues will grow again in 2022 at a healthy rate, helped by a strong start to the year, on top of organic and cyclical drivers.”

GroupM: In GroupM’s updated forecast the agency expects ad revenue in the U.S. to increase year-over-year by 9.3% in 2022, this is a slight decline from December’s forecast of +9.8%. Including political dollars ad spend is forecast to reach $343 billion, a year-over-year growth of 12.8%. The U.S. represents 39% of the global ad spend.

After a robust 2021 (+41%), GroupM forecasts an increase of 14.8% for 2022 (excluding political) For the year, pure-play digital is forecast to exceed $200 billion ($201.2 billion) for the first-time accounting for 61% of all ad dollars.

For 2022 GroupM projects television/streaming ad dollars (excluding political) to grow by 3.4%, with higher results in national television and lower results in local television. The agency cites the growth will come from advertisers enticed by the continued growth of connected TV and such streaming providers as Pluto, Tubi, Roku and Hulu. The ad supported opportunities have kept dollars from being allocated to digital media. Traditional TV will account for 83% of the $72 billion allocated to television/streaming.

In the years ahead the agency expects ad spending for TV/streaming to slightly decline as dollars shift from linear to connected TV. Group M cites limited ad breaks and the CTV’s ability to meet the reach and frequency objectives of marketers. Meanwhile, the declining ratings of linear TV also faces headwinds from continued cord-cutting. TV/streaming is forecast to have 21.4% of total ad dollars in 2022 dropping to 19.5% in 2024.

Among traditional media, out-of-home is expected to continue its rebound from the pandemic as more people are outside with new marketers and the return of travel and other traditional OOH advertisers return to support the medium. GroupM expects ad dollars (excluding political) to grow year-over-year by about 10% in 2022. Total audio output is expected to generate $15.6 billion (+6.6%), newspapers $9 billion (-7.3%) and magazines $10.8 billion (-5.5%).

Globally, GroupM forecasts ad dollars to total (US) $850 billion, a 9.7% increase from the previous year. GroupM projects the strongest markets to be Latin America (+11.7%) and North America (+10.0%). With a sluggish China ad market, Asia Pacific growth will be the slowest region at +5.7%). India ad market is expected to grow by 22%.

Source: https://www.forbes.com/sites/bradadgate/2022/06/14/despite-economic-headwinds-agencies-forecast-a-strong-ad-market-for-second-half-in-the-year/