U.S. Advertising Marketplace Is Expected To Slow Down But Still Exceed $300 Billion

Last week Magna Global, a media agency that is part of Interpublic GroupIPG
(IPG) released their latest forecast for the U.S. advertising market covering 2022 as well as an update for 2023. This is a revision from Magna’s last report issued in June. The report was written by Vincent Létang, EVP Global Market Intelligence at Magna. The next forecast will be released in December.

Despite concerns about the economy, overall Magna still projects an increase in ad dollars for the rest of 2022 and all of 2023. In the first half of 2022 with the Beijing Olympics year-over-year U.S. ad dollars grew by 11% totaling $151 billion. In the second half of the year with mid-term elections and FIFA Men’s World Cup, Magna projects an ad spend increase of 9.8%. When non-cyclical ad spending and political dollars are excluded, the increase is expected to be 8.1%.

For all of 2022, Magna projects U.S. ad spend will total $323 billion, exceeding the $300 billion threshold for the first time. In 2023 citing an anticipated economic slowdown, Magna revised its year-over-year ad spend growth downward from +5.8% to +4.8%. In addition, 2023 is politically an off- year and there are no Olympics or Men’s World Cup (although the Women’s World Cup will take place next Summer) impacting ad spending.

First Half 2022 Recap: Magna reported in first quarter ad dollar growth was 14% and second quarter growth was 7%. Looking at media channels among the strongest was out-of-home (+30%) as the country continued to re-open and people were more mobile. Over the first six months of the year Magna cited other growth outlets as digital media including search (+19%), audio streaming and podcasting (+19%), connected TV and ad supported video streaming (+18%) and short-from digital video (+14%).

Conversely, the ad spending for social media grew by only +3.2% in the first-half of the year compared to +38% in 2021. Vincent Létang writes: Social media apps continue to suffer from the reduced access to user data in the iOS environment, which impacts the attractiveness and pricing power of social ad formats, while total social media usage has reached maturity.

Despite the Beijing Olympics, linear TV ad dollars grew by just 2% to $20 billion. Local broadcast TV benefitting from a politically charged environment increased ad dollars by 10% totaling $9 billion. When political ads are excluded, the growth was a more modest 2%.

Second Half 2022: With inflation and doubts about the health of the economy, some product categories will scale back on their ad budgets; including restaurants, retailers, mortgage companies and CPG. Political advertising however will thrive as campaign donations continue unabated. Magna projects political ad dollars to increase by 63% from the 2018 midterms. Local television will garner close to 70% of the largesse. Digital media will have a sizable increase as candidates rely more and more on connected TV, search, streaming video and social media. When cyclical events are eliminated, Magna expects ad dollar growth to be a more modest 6.6%.

For all of 2022 Magna forecast the ad spending for TV to increase by 8%, with ad supported video (AVOD) increasing year-over-year by 22%. Broadcast TV benefiting from political will also increase by 22%, with linear TV at -3%. All radio (terrestrial, digital and podcasts) is projected to grow 7%. Out-of-home and cinema will have a significant increase of +22% and +138% respectively. Search will increase 17%, direct mail +8% and social media will rise 4%.

2023 Forecast: Looking at product categories, for 2023 Magna expects several verticals to bolster their ad spending budgets. These include entertainment as moviegoing continues to rebound and streaming video remains competitive, online sports betting (especially if California and other large states legalize it), travel and possibly automotive may see a rebound after two lean years. Conversely, the ad spending for CPG, financial and retail may not be as robust.

Looking at select media channels, Magna expects with an ad supported tier coming to NetflixNFLX
and Disney+ ad spending for AVOD will grow. The ad dollars being allocated to Netflix and Disney+ will not come from existing from rival ad supported services; Peacock, Hulu, etc., but from other media channels such as linear TV. Hence, the ad spend for long form video streaming will grow by 33% in 2023 compared to 22% projected this year.

Conversely, with an off-year politically local broadcast TV ad spend will drop by 22.1% and national linear TV will be down 5.8%. The ad spend growth for out-of-home and cinema will be more modest at +7.7% and +34.9% respectively. The ad spending for all of audio will have a slight increase of 0.8%. Létang notes, both digital out-of-home and digital audio will be aided by programmatic buying.

Another growth medium will be retail media advertising. While ad dollars are modest compared to other channels ($42 billion in ad spend, from $31 billion in 2022), Amazon’sAMZN
product search has made strides in the nascent medium and other prominent retailers have become more active. In a study, Magna found ad retail media advertising is “mostly fueled by consumer brands reallocating below-the-line, trade-marketing budgets from in-store towards digital retail networks, as a greater percentage of retail sales comes from e-commerce.”