While forecasting has always been a mixture of art and science, predicting global ad spend following the pandemic has been particularly tricky. Has behavior reverted back to the old pre-pandemic normal or are we evolving into a new normal? How does traditional media compare with digital spend? Which countries are poised for growth?
These questions and more are answered in the latest Global Ad Forecast authored by MAGNA's Vincent Letang, Executive Vice President, Global Market Intelligence. Fielded four times a year in the U.S. and twice a year globally, the report forecasts global ad spend across 70 markets using historical ad revenue from media owners' financial reports or local media trade organizations such as the OAAA and TVB and ad spend forecasts that are based on the macro-economic outlook and the competitiveness of each media format.
According to Letang, media owners' advertising revenues are predicted to reach $842 billion, a +4.6% growth over 2022, which suffered during its last six months. "2022 started strong but the second half was very weak," he explained. "The first half of 2023 was flat year over year, generally speaking (+1.4%), but improved globally due to China (+6%), Spain and Italy (both +3%). The U.S. was essentially flat at +1%, while Germany and the U.K. were down slightly at -0.5%." In terms of industry verticals and media types, "retail media and social helped drive growth in the first quarter," he added.
For the U.S. specifically, 2022 was an unusual year with the midterm elections and Olympic games adding incremental advertising dollars. If you take those two factors out of the equation, the U.S. is projected to grow +4.2% in 2023, compared to +2.5% with those cyclical events included in the totals, according to Letang.
Globally, "the largest growth market is India for the third consecutive year at +12%. India is consistently the fastest growing economy and the fastest growing advertising market globally ahead of China, which slowed down considerably last year because of Zero Covid public policy. The moment the Zero Covid policy was removed in December 2022 the economy started to re-accelerate. We expect China to grow +8%," he asserted.
Letang shared that digital remains the fastest-growing media format, spurred by Search (+10%), which includes the small but fast-growing retail media networks. Amazon accounts for much of this growth, but other retailers, such as Walmart, are improving their digital offerings as well. Yet, for traditional media, global ad revenue is projected to shrink by -3% with traditional television off -5% and publishing off -4%. The bright spots are out-of-home (up +5%) and cinema (+23%), which are benefiting from a consumer surge post-Covid.
For publishers that are lagging in growth, Letang recommended that "they continue to innovate … and they do, to be fair. For television, for example, while the majority of revenues still come from traditional commercials, a growing portion now comes from AVOD and addressable spots. We find that, depending on the market, the average growth is about +10% for television for these new and alternative ad formats served on CTV, for example. But currently this growth is not enough to offset the declines that traditional ad formats, such as linear TV, continue to experience."
For Letang, "there is not much that media owners can do in the short term when the economy is tough. They must, however, continue to innovate because in the long term it will pay off." A great example of the positive impact of innovation is in out-of-home, "which has been and still is one of the most dynamic media formats," as the channel continues to develop its digital capabilities, with dynamic insertions and improvement in data collection. "About 30% of out-of-home revenue is generated by digital units -- digital billboards in airports or train stations and subways, up from 10% maybe ten years ago," he said. In addition, both out-of-home and cinema are benefiting from a return to pre-Covid behaviors as more people are on the street exposed to billboards and returning to movie theaters. "It's not back to pre-Covid levels but, depending on the country, it is back 50-70%," he noted regarding cinema.
What can advertisers do to spur growth at a time when future budgets might be constrained? "Sometimes there is a tendency for marketers with flat or lower budgets to invest in low funnel channels like search because that is where you can best measure campaigns," Letang said. "It feels safer. But it is very risky to de-prioritize upper funnel channels like television or radio because you lose share of voice to competitors and ultimately you lose market share.
"In the long term, it costs you more to rebuild your share of voice. Don't be silent. Continue communicating to customers," he concluded.
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