The latest update of global media investment and intelligence company MAGNA’s “Global Ad Forecast” predicts media owners' advertising revenues will reach US$833 billion in 2023, a 5% growth versus 2022 (US$795 billion), slowing from an increase of 7% in 2022 and 23% in 2021. This new 2023 growth forecast is 1.5 percentage points below MAGNA’s previous forecast (June 2022) due to the deteriorating macroeconomic outlook.
After a strong start in 2022, advertising spending growth slowed significantly in the second half amidst global economic uncertainty. Nevertheless, full-year 2022 ad revenues still grew by almost 7% to US$795 billion, helped by record levels of cyclical spending, such as elections in Brazil and the US, Winter Olympics, FIFA World Cup. Vincent Létang, EVP, global market research at MAGNA and author of the report, said that the advertising spending slowed down in the second half of 2022 because of economic uncertainty and issues affecting digital advertising formats, but traditional editorial media managed to grow by 2.5%. He also added:
The gap in growth rates with digital advertising growth (+8.9%) was the narrowest ever measured by MAGNA, suggesting that the long-term transition to a digital centric marketing landscape has slowed down following the COVID acceleration.
“Marketers continue to value the brand safety that editorial media vendors deliver, combined with expanding cross-platform opportunities. Television (+2%) and OOH media (+12%) were particularly resilient in 2022. The introduction of ad-supported premium streaming in 2023 and the continued success of digital audio formats also exemplify the comeback of ad-supported editorial media in the top of mind of marketers, consumers and media executives,” Létang added.
Will ad spend recover in 2023?
Traditional media companies, such as television, audio, publishing and OOH, saw their advertising revenues grow by 2.5% this year, despite the challenging economic environment, while digital media companies grew by 9%. This is the narrowest growth gap ever observed by MAGNA, signaling that editorial media brands remain attractive and relevant as they now combine brand-safety with cross-platform reach.
Several industry verticals may slow down marketing expenditure in 2023; for example, CPG/FMCG verticals and finance. Entertainment, travel and betting will continue to be driven by post-COVID recovery and regulatory relaxation. Automotive is a big question mark due to the uncertainty in macroeconomic environment and supply issues, but MAGNA believes ad spend will finally start to recover in 2023.
In that environment, the ad sales of traditional media owners will slow: publishing and television ad sales will shrink by 3% and 4% respectively. While audio advertising will be stable (+1%) and out-of-home ad revenues will grow by 6% to reach almost US$32 billion, just above pre-COVID total.
Meanwhile, digital advertising sales will grow by 8% to reach US$557 billion dollars. For instance, 65% of total ad sales will be driven by organic growth factors, such as eCommerce and media consumption shifts. Digital video will be the fastest growing ad format (+11%) followed by search (+ 10%) and social recovering slightly (+7%).
Television advertising will suffer from continued erosion in linear viewing (5% to 15% decrease depending on targets and markets), and the lack of cyclical events following the record cyclical spending of 2022, mitigated by resilient pricing (average CPM costs +10%) and growing AVOD ad sales on broadcasters’ streaming platforms.
Mitigating audience erosion
To mitigate audience erosion and weaker demand from key industry verticals (CPG, finance, pharma), television companies can count on a few strengths and drivers
- Strong growth for non-conventional ad sales (AVOD, linear addressable 10% to 20% in major markets).
- Resilient pricing (TV CPM inflation hit double-digits in 2021-22 and will continue to grow by an average 10% in 2023).
- The rise of brand safety and media responsibility in marketers’ priorities that leads some brands to slow down digital diversification.
- The resilience of sports audiences, compared to other genres.
Television is the medium that’s most affected by cyclical ad spend related to elections and global sports events: neutralising cyclical dollars, global television ad revenues would have been slightly down (-1%) in 2022.
In 2023, APAC advertising revenues will increase by 6% to US$263 billion, 23% above the pre-COVID spending level, driven by digital advertising growth (+70%).
The second largest ad market, China (15% of global advertising revenues), will re-accelerate in 2023 (7% increase to US$128 billion) following a historically weak performance in 2022 (+3%) due to the zero COVID policy crippling the economy and regulatory restrictions slowing down digital media.
Among the world’s top 15 advertising markets, the strongest 2023 growth will come from India in 2023 (+14%) and South Korea (+7%). At the other end of the spectrum, MAGNA expects very little growth (under +3% all-media, negative for traditional media) in Germany, Italy, Japan and Spain.
India is now consistently ahead of China as the fastest-growing emerging economy (projected RGDP growth of 6.1% in 2023 verses China’s 4.4% increase) and the fastest-growing large ad market (projected growth of 14% verses China’s 7% increase in 2023), just as it’s about to surpasses China to become the world’s most populous country in 2023.
Leigh Terry, CEO Mediabrands APAC said: “The Asia Pacific advertising economy will grow by 5% this year, following the 2021 rebound (+18%). In 2023, the Asia Pacific ad market will expand by 6%, which is slightly higher than the global average of 5% and in line with the pre-COVID long-term regional growth.”
Terry also said that growth is powered by large markets such as Australia (+8% in 2022, +5% expected in 2023) and India (+15% in 2022, +14% expected in 2023). In 2023, APAC advertising revenues will increase to US$263 billion, 23% above the pre-COVID spending level, largely driven by digital advertising growth (+70%).
Gurpreet Singh, managing director MAGNA APAC added: “After a double-digit growth in 2021 which was largely a bounce back from negative growth in 2020, advertising spends in Asia Pacific continue to grow but at relatively lower growth rate. Growth in overall advertising spends is mainly driven by growth in digital spends, while spends on linear media overall are mostly showing decline in a majority of the APAC markets except for OOH which is getting back on growth track in most markets."
"Overall linear media spends are not yet able to come back to pre-COVID levels in most of the APAC markets. South Asia is an exception where linear media is still showing good growth. Share of digital spend is already in a dominant position in more than half of the APAC markets, and within the next five years, we expect this trend to expand across the vast majority of APAC markets," Singh added.
Individual medium update
OOH completes full COVID recovery: OOH media has been the success story of 2021 and 2022. At the end of 2022, OOH advertising has already recovered its pre-COVID size in several markets (US, Germany) and MAGNA believes it will complete a full global recovery in 2023 by growing by 6% to US$33.5 billion (2019: US$33.2 billion). The OOH medium benefits from the recovery of consumer mobility. Leisure air travel recovered much faster than expected in 2022 (except in Asia), driving is back to, or above, pre-COVID levels. Transit has recovered too but is still 10% to 20% below pre-COVID levels as a significant percentage of workers continue to work from home part of the week.
Audio fueled by new digital formats: Audio advertising formats increased ad sales by 4% in 2022 to reach an estimated US$29.9 billion, still shy if the pre-COVID total (US$31.8 billion). MAGNA anticipates flat ad sales in 2023 (+1%) as the continuing rise of digital audio ad formats (audio streaming and podcasting) barely offset a slowdown in broadcast radio revenues. The growth in digital audio ad sales comes from digital pure players as well as radio broadcasters developing their on-demand and streaming offering and attracting more and more brands thanks to improved targeting opportunities
Publishing ad sales suffer from privacy limitationsL Publishing advertising sales shrank by 3% in 2022 to US$47 billion. Both newspaper brands (-3%) and magazine brands (-4%) suffered as the growth in digital ad sales did not offset the long-term decline of print ad pages and revenues. Publishers’ digital ad sales are hurt by the limitations in data collection and data-based targeting online in both the browser and the app environment since iOS 14. MAGNA predicts another decline of 3% for global publishing ad sales in 2023.
Search will be recession-proof, privacy-proof: Keyword-based search advertising formats, including product search by ecommerce platforms, remain the largest advertising format with consumer brands and small businesses spending US$260 billion in 2022 globally. While the growth of other digital ad formats slows due to data restrictions, Search is driven by the continuing growth in eCommerce and retail media networks and was the fastest-growing ad format in 2022 (+13%). Growth was fueled by volume rather than pricing: search queries increased by 3% and click-through-rates (% of search results leading to sponsored link clicks) increased by 9% probably because an increasing proportion of searches are product or shopping searches. The same organic growth factors will generate an additional 10% in global search spend in 2023.
Social media ad sales stalling under a storm of headwinds: Multiple headwinds (plateauing reach and usage, brand safety concerns, targeting limitations and the rise of video snacking hurting both insertions and pricing) combined to cause social media advertising revenue to stall in 2022. Global ad sales grew by just 4% to US$149 billion, a far cry from the growth rates of 20% to 35% observed in the past three years. TikTok is the only social media owner to post advertising growth, while incumbent social networks suffer flat or declining ad sales, especially in Europe and North America. MAGNA anticipates social media advertising to re-accelerate only slightly in 2023 (+7%).
Digital video continues with robust growth: Digital video advertising will increase by 11% in 2022 to reach US$65 billion. This represents the second fastest growth rate of all digital formats, slightly trailing search advertising. All components of the digital video landscape continue to grow, but short form user generated content (YouTube, Twitch and more) have seen slowing growth this year. CTV usage and streaming consumption continues to be a tailwind for long-form streaming growth, and 2022 has been no exception.
Digital concentration pauses from media owners: The digital media giants saw slower growth in 2022 than they have in recent years. Based on financial publications in the first three quarters, MAGNA expects the top three (Google, Meta, Alibaba grew net advertising revenues by a combined 5% in 2022 compared to 41% increase in 2021). For example, they underperform overall market growth (+6.6%) for the first time ever and their share of global ad sales paused at 42% after rising sharply and constantly in the last 15 years. Meanwhile, other top 15 media owners, Amazon, Bytedance, Microsoft and Apple continued to enjoy double-digit stronger growth in 2022.
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