Global Ad Market Continues to Grow Despite Traditional Media Struggles

The global ad market will continue to grow in 2023, though traditional media formats have seen better days. Just ahead of Cannes Lions, Magna is releasing the summer update to its Global Ad Forecast, showing advertising revenues will reach $842 billion, a 4.6% growth over 2022 ($805 billion). According to Magna, though Western markets are facing a down economy, stronger-than-expected growth in markets such as China and Spain, as well as verticals such as retail and social, are mitigating losses. Overall, Magna's forecast is 0.2 percentage points lower than its previous December 2022 prediction of 4.8% growth. "Advertising spending slowed down to a halt in the first quarter of 2023 (+1.5% globally, flat in most Western markets) due to economic uncertainty and the lack of cyclical drivers," Vincent Létang, evp of global market research at Magna, and author of the report, said in a statement. "There are, however, some drivers mitigating the impact of economic slowdown: ecommerce and Retail Media bringing more marketing dollars into digital advertising formats, and the counter-cyclical dynamic of some large industry verticals (Retail, Auto, Travel)." Though Létang and Magna expect the global marketplace to keep growing this year, traditional media formats and mature markets will struggle. However, Létang added that traditional media owners are developing cross-platform capabilities and brand-safe addressable solutions that are increasingly attractive to brands, accounting for 19% of their advertising revenues. TV is among the industries facing an uphill battle. Global Ad Spend on the Rise, but Digital Growth Is Slowing The report notes that editorial media companies and branding formats (television, audio, publishing, OOH, cinema) are vulnerable in economic downturns and uncertain business climates when brands are tempted to reduce marketing budgets or prioritize performance-based digital ad formats over high-funnel branding channels. Thus, the advertising revenues of traditional media owners will shrink by 3% this year to $264 billion, which comprises 31% of total ad sales. Overall, television advertising revenues (cross-platform long-form video ad sales) will shrink by 5% this year to $159 billion, according to Magna. The continued migration away from linear is also hitting TV broadcasters hard in live linear viewing and rating supply (averaging a 10% drop in 2022), a slowdown in pricing conditions and a lack of cyclical events following the record cyclical spending of 2022 with events such as the FIFA World Cup. According to Magna, the "lack of a major cyclical sports event in 2023" will also slow the growth of various industries, such as betting. (However, Fox Sports recently noted to Adweek that ad buys for the Women's World Cup were up by 50% over 2019.) However, streaming is still on the rise. According to Magna, digital ad sales, including addressable linear campaigns and AVOD pre-rolls on connected TVs, keep growing. In 2022, these sales accounted for an average of 12% of total advertising revenues for broadcasters in top markets (U.S. and U.K. around 15%, Germany 9%, France 7%, Japan 2%). Broadcasters’ non-linear revenues grew by 10% to 20% across key markets last year, but there was a slowdown in the first half of 2023. Regardless, Magna notes that the scale does not compensate for the loss of linear ad sales thus far. Elsewhere, digital pure-play advertising is on the rise, as it's set for 8.5% growth, reaching $577 billion and 69% of total ad sales. Growth factors include ecommerce, retail media, media consumption shifts and stabilization in the data landscape. Social media formats are re-accelerating, expected to grow more than 9% to $172 billion, while short-form pure-play video advertising will grow 8.6% to $71 billion. Search/commerce formats will also remain large, approaching $300 billion for the year. Within search/commerce, retail players are expected to generate $121 billion in advertising sales on the year, a 12% gain with product search and ecommerce sponsorship leading the way. Though the bulk of these ad sales will come from ecommerce pure players, traditional retailers are developing media capabilities that will have ad sales growing by 24% to $21 billion. Where markets are heading When it comes to markets, the strongest growth rate will come from India in 2023, as the country looks to gain 12.3% to reach $12.6 billion. Meanwhile, the Chinese ad market will recover faster than previously expected, rising 8.4%. Western European markets will stagnate this year, according to Magna, with Germany, France and Italy all below 3% growth across media, and negative returns for traditional media owners. In the U.S., media owner advertising revenues will increase just 2.5% to $333 billion this year. Cross-platform video has some of the biggest struggles, dropping 8%. Publishing is expected to be down 6%, audio down 2% and direct mail down 7%. Though ad spend stagnated in the fourth quarter of 2022 and the first quarter of 2023, it's expected to accelerate in the second half (which is a notion publishers have often been repeating in earnings calls). Though big-ticket items typically struggle in economic downturns, Magna reports that the current situation is complex due to a number of factors. Firstly, high inflation, especially for food and drink products, is a challenge for CPG. Plus, unemployment remains low, which is key to keeping big-ticket purchases strong. And Lastly, travel and automotive are back in a big way while recovering from Covid-19 disruption and supply chain issues. The industries are growing spending by more than 10% in most markets on the year. Meanwhile, several categories, such as tech and telecom, finance (except in some markets like Germany where high interest rates are reviving competition between investment and saving products) and restaurants have struggling sales and stagnating or declining marketing spending. Others have more promise than expected, including grocery retailers in markets such as Germany, France and the U.K. Block-busted Entertainment has also disappointed, according to Magna, which expected blockbuster releases and streaming to ramp up sales. Still, Magna expects entertainment brands to resume the market share grab in 2023 or 2024, especially with rebrands such as Max hitting the market and the influx of ad-supported tiers. And for top vendors, more competition is on the way. The three largest media owners in 2022 (Google, Meta and Alibaba) captured 47% of global ad spend, a loss of 2% from 2021 due to slowed growth. However, challengers grew much faster than those big three companies in both the Western world (Amazon up 21%, Apple up 37%) and China (Bytedance/TikTok up 40%, Pinduoduo up 42%). In its conclusion, Magna predicts that 2024 will have economic stabilization and a return to major cyclical events such as the U.S. presidential election, the Olympics in Paris, Euro Football champions will re-accelerate ad spend, with 6.1% growth expected globally to $892 billion and 7.3% in the U.S. Traditional media owners’ ad revenues will recover by 1% while digital pure players ad sales will increase by 8%.

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