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Agency Analysts Says Media Inflation Will Be Less Of A Hurdle For Ad Buyers This Year.

Like prices at the supermarket, media prices have been higher during the past year as inflation pushed CPMs (cost per thousand impressions) up across the media spectrum, including audio. But Luke Stillman, Senior VP of Global Insights at Magna, thinks media inflation rates in 2023 will begin to reflect the trend lines in the broader economy, where consumer inflation has now fallen to its lowest level in two years.

“This year, we expect a lot more stability going forward,” Stillman said. “Media pricing took a big hit during some of the COVID quarantine times for a lot of digital formats. They have come almost all the way back, and now we're certainly not expecting that kind of movement.”

That may be true, but PwC Principal Christiana Bangah said she would feel better about pricing if the marketplace begins to look more normal. “It would be intellectually satisfying if we start to see discounts for major upfront commitments and premiums for more flexibility,” she said. “I think we're going to enter a world where that starts to find its way into pricing strategies in a more meaningful way.”

During the annual unveiling of the Internet Advertising Bureau’s revenue report this week, Stillman said determining exact pricing trends remains as tricky as ever since a lot goes into media pricing, with “huge variances” from quarter to quarter and year to year, as well as when a marketer targets one audience over another.

Tracking The Big Growth Opportunities

The ad giant Magna has predicted that overall ad industry revenue will increase 3.4% this year to an all-time high of $326 billion. Magna sees a mixed bag for the two sides of audio advertising. It says overall audio ad spending will “stabilize” at around $17 billion this year. But while AM/FM radio ad spending is expected to contract by four percent, digital audio ad spending is forecast to grow nine percent.

Stillman said although economic factors and inflationary pressures cut ad spending in several major product categories last year, he thinks the outlook is improved in the automotive, entertainment, and food and beverage categories this year. “We see a recovery in a lot of those industry verticals,” he said during the IAB webinar.

The biggest turnaround will likely be in the auto industry where supply chain issues are slowly being resolved and that has left car companies shifting back to a more traditional need to buy ads.

“Demand hasn't mattered much, because manufacturers just didn't have that many cars to sell every car they made immediately, and there was no reason to advertise because they didn't have to drive consumers to dealer lots,” Stillman said. “But what we're finally seeing years after the pandemic hit, is demand and supply is starting to come back into balance. More importantly, we're seeing inventories ticking up which means there are cars on dealer lots, which means that manufacturers and dealers are going to start spending again to try and get consumers to buy a car. We think that's going to help boost spending on all formats, but especially on digital.”

As the summer vacation season begins, the big airlines and hotel chains are also predicting strong sales in the coming months while the post-pandemic impact on the travel industry extends a second year. And that will be reflected in advertising.

“Travel will again be the growth leader this year,” predicts Stillman. “The story is very straightforward. With COVID in the rearview mirror, they're back to spending on travel at pre-pandemic levels. And with that, comes significant growth in ad spend.” He added that Magna predicts travel spending will be “heavily skewed towards digital formats.”

Entertainment ad spending is also expected to finally rebound as more people return to movie theaters. That was illustrated by the blockbuster launch of the “Super Mario Brothers” movie debut last weekend, as it enjoyed the biggest global debut in history for an animated film.

“Even more important than that, though, are streaming services,” Stillman said, as he believes consumers have “completely reset” the amount of money they're willing to spend on streaming video platforms. “With that additional money comes additional ad spending,” he predicted. Also boosting expected advertising levels is the fact that the streaming video realm has become much more competitive with churn levels rising as consumers are becoming savvier at turning streaming services on and off.

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