Magna Forecasts U.S. Ad Spend To Reach $326 Billion This Year

Magna, a prominent global media investment and intelligence company, recently released their latest ad spend forecasts for 2023 with a recap of 2022. The economy in 2023 will be a combination of positive and negative trends both affecting ad spend. On the plus side will be a slow but sustained GDP growth, a positive job market, slowing inflation rates as supply chain issues have abated. On the negative side will be uncertainty in financial markets and wavering consumer confidence.

In 2023 Magna projects the U.S. ad market to grow by 3.4% totaling an all-time high of $326 billion. Previously, Magna had projected annual growth to be +3.7%. Ad dollar growth will be slower in the first half of the year (+2% to + 4%), before picking up in the latter half of 2023 (+6% to +7%) with a stronger economy anticipated. For the year, growth will come from digital media which is expected to increase by 9%. Conversely, linear media ad dollars are projected to decline by -4%.

Last year the U.S. ad marketplace increased by 6% reaching $315 billion. The analysis noted in the second half of 2022, the ad marketplace tailed off precipitously especially in the final three months reporting minimal growth (+0.8%) from the previous year. (Magna points out 2021 was a particularly robust year for ad spend growth post-COVID.)

Magna notes, among the faster growing media segments will be search led by Google
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, e-commerce led by Amazon
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and retail media networks. The ad dollars for these platforms are forecast to increase by 10% in 2023 (compared to +14% in 2022) and will total $125 billion, more than any other ad format. Helping to fuel this increase will be the CPG category.

Social media outlets led by Facebook, Instagram and TikTok are forecast to generate $66 billion in ad spend for the year, a 6% increase. In 2022 social media ad dollars grew by a more modest 2% caused by data targeting restrictions and a maturing audience.

Magna expects cross-platform long form video ad dollars which includes linear TV, AVOD and FAST will total $43.8 billion for the year, a -1% drop-off from 2022. Linear TV ad sales are expected to fall by -5% caused by lower demand. On the other hand, ad spend for AVOD and FAST will increase by 20%. Coming off a strong political year in 2022, local TV ad dollars are projected to drop year-over-year by -24%. (When political ad dollars are excluded, the decline is a more modest -5%).

Cross-platform audio is expected to generate $17 billion in ad dollars. Similar to video, ad dollar growth will come from digital platforms (streaming and podcasting) which will grow by 9%. Podcasting is expected to increase by 16%. (Magna had previously projected podcasting to be +22% for the year but noted a slower ad market for the downward revision.) Conversely, the ad dollars for linear radio will see a drop of -4%.

The ad spend for publishing formats will total $15 billion, a decline of -5% as ad spending for print advertising continues to drop. Digital ad sales will be the bright spot at (+4%) led by such categories as luxury brands.

Out-of-home advertising will continue to be strong in 2023, reaching $9 billion in revenue, a 6% increase. Leading the growth will be digital OOH and the continued breakthroughs in programmatic that attracts national advertisers. In addition, local businesses such car dealerships are expected to ramp up their out-of-home ad budgets.

Direct mail ad dollars are forecast to decline by -4% for the year to $16.8 billion. When political ads are included, the decline is -7%. Magna notes in 2022 ad spending for the medium had increased in the first nine months before dropping off by -8% in fourth quarter

Looking at product categories, Magna expects travel and movies to continue to rebound post-pandemic. Another product category not slowing down will be streaming video which continues to be extremely competitive. In addition, the recently launched ad supported tiers on Netflix
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and Disney+ will be promoting to marketers as well as to subscribers and viewers. The product category with the biggest impact on spending growth however, will be automotive. Magna notes despite the sluggish economy, in the final six months of 2022, auto sales began to rebound. In 2023, car sales are expected to grow year-over-year by 10%, with the corresponding ad spending to increase in the 10%-15% range by car dealers (primarily in local television).

Other categories that are not forecast to have robust growth this year include CPG, food and drink, retail and restaurants. These categories are expected to cut back on their linear media allocation with slight increases in digital media ad dollars, resulting in either a slight or no increase in total spend. Other categories that are forecast to have a sluggish 2023 include real estate and such financial subcategories as banking and credit cards. On the other hand, after a slow 2022 insurance, the largest financial subcategory, is expected to rebound in 2023. Overall, the financial category is forecast to grow year-over-year by 5%.

Magna notes the continued technology innovation offering marketers new brand-safe advertising opportunities that can target consumers via scalable or addressable will give the ad economy a boost. Vincent Létang, EVP, Global Market Research at Magna and author of the report, said: “In a similar economic climate, ten or twenty years ago, the U.S. advertising market would almost certainly fall off a cliff. Things are different in 2023 because of media innovation fueling marketing demand.” Létang adds such organic drivers as retail media networks redirecting billions of marketing budgets dollars into ad formats. Also, long-form OTT streaming is going mainstream and increasingly ad-supported, brands finally have cost-effective solutions to reconnect with audiences that had become hard and expensive to reach via linear television.