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After A Strong Q3, Wieser Boosts Q4 Ad Market Forecast To 9% Growth.

Respect advertising and Wall Street analyst Brian Wieser says strong advertising trends in the third quarter portend a “better-than-expected” full year 2023 and 2024 U.S. ad forecast. Seeing “an acceleration in underlying advertising growth in the coming quarter,” he is boosting his fourth quarter 2023 outlook by one percentage point to 9.0% ad growth.

Wieser’s new quarterly forecast estimates that U.S. advertising (including directories and direct mail but excluding political advertising) grew by 8.1% in the third quarter, which he calls “a meaningful acceleration” over second quarter’s 4.6% growth rate and a 1.6% bump in Q1. “This acceleration in the most recent quarter was expected, if not to the same degree of strength as we ended up seeing,” Wieser writes in his Madison and Wall newsletter.

“Relatively easy” comps were a big factor in the Q3 upswing. In 2022, the ad market jumped 17.8% in Q1 and Q2 grew 10.2%. But those double-digit gains faded by third quarter 2022, which increased by 3.6%.

Digital advertising accelerated to its best level of growth since first quarter 2022, surging by 14.6% excluding political and +12.2% with it. TV, meanwhile, continued to decline with national TV down by about 3.2%. The decrease was steeper for traditional TV. When Wieser excluded sellers of TV advertising who do not operate traditional broadcast networks (i.e. Amazon, Roku, Vizio, etc.), his estimates show traditional sellers of TV advertising saw declines of 5.6% including their connected TV or digital inventory.

Within national TV, digital/connected TV (including TV networks’ streaming services) grew by 11.6% to account for 34% of total revenue (up from 30% of all national TV in the year-ago quarter).

Local TV, including broadcasting and cable, “was not immune from these trends,” Wieser says, although the decline was less pronounced than at national TV with local TV down 2.8% year-over-year.

Audio (including radio and digital audio) was down 2.6% in the third quarter, which Wieser says is similar to the decline for publishing of newspapers, magazines, and related digital inventory. Outdoor (including cinema and digital out of home) advertising was up 3.0% ex-political.

Compared to his earlier expectations, Wieser says the third quarter “was a very good one.” In September he was calling for only 6.0% ad market growth, excluding political advertising. That included 12.3% growth for digital platforms and a 6.5% decline for national TV, including its digital extensions. Publishing also fared better than he expected by several percentage points. However, outdoor, audio, directories, and direct mail “saw results which were very close to what I originally expected,” Wieser says.

Looking ahead, he sees “a significant degree of positive momentum in the US advertising industry, despite sentiment that often appears to be negative.” While there was some concern among investors about curtailed spending by marketers during the first few weeks of the Israel-Hamas war, indicating that some advertisers may have briefly paused activity, the broader industry didn’t see noticeable deterioration from the otherwise positive underlying trends as the third quarter turned into the fourth.

And with easy comps to Q4 2022, when the ad market was up just 0.2% as the post-pandemic spending boom faded, Wieser forecasts “an acceleration in underlying advertising growth in the coming quarter.” To that end, he is boosting his fourth quarter 2023 outlook by one percentage point to 9.0% ad growth. “This would result in a 5.9% underlying growth rate for the US ad market for all of 2023,” he says.

In another positive indicator, the U.S. ad market expanded for a fourth straight month in October, rising 3.2% over October 2022, according to updated data from Guideline's U.S. Ad Market Tracker. According to MediaPost, it was the biggest increase since July's 6.2% gain, “and is an indicator that the ad spending from the major agency holding companies and biggest independent media agencies has pulled out of recession -- at least for now.”

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