BIA Advisory Services is the latest media forecaster to lower its ad spending outlook for 2022 based on the nation’s economic slowdown. The local media intelligence firm says total U.S. local advertising will clock in at $167.4 billion, a decrease from the $173.3 billion it forecasted in December 2021.
“Headwinds from overseas conflicts, continuing supply chain issues and deep cuts in ad spending from automotive and other large categories precipitated the reduction,” BIA said. However, there are still several positives for the ad market this year, including what is universally expected to be a strong political ad year, along with an expansion of local ad spend by online gambling brands, and consumer spending on leisure and recreational activities.
BIA is forecasting “significant growth” for radio online in 2022 which is expected to jump 14.5% to $2.99 billion, up from $2.61 billion last year. Over the air radio is in for more modest growth to $11.16 billion, a 3.8% increase from $10.75 billion in 2021. All of those projections are lower than what the firm forecast last December. Back then it was calling for $11.38 billion in over the air radio revenues and $3.06 billion for radio online.
But the year didn’t start as strong as BIA anticipated, “making for a difficult first two quarters as some expected advertising spend started to retract,” said Mark Fratrik, Senior VP and Chief Economist, BIA Advisory Services. “On the one hand, personal income continues to rise, but the cost of consumer goods, rising gas prices and inflation are having a major impact and we believe that will influence how advertisers will choose to use their ad dollars in the coming months. All of that must be weighed against what we see as positives for local advertising this year.”
The updated local advertising forecast, which covers 16 media and 96 sub-verticals, still gives traditional media a slight advantage over digital at 52.5% of the ad spend ($87.9 billion), compared to 47.5% for digital media ($79.5 billion). Overall, BIA is downgrading digital estimates slightly from the original 2022 forecast because of mobile-facing headwinds amid new privacy measures on iPhones. There has also been slower than anticipated growth. Even as both digital channels continue to grow, it’s at a reduced pace than originally expected, BIA says.
The top three paid media channels for 2022, per BIA, include Direct Mail ($34 billion), Mobile ($32 billion), and PC/Laptop ($30 billion). Over-the-top (OTT) is still slated to be the fastest-growing channel, up a whopping 57.4% this year. Thanks to robust political spending, significant growth is expected in over the air TV (+30.3%) and TV Digital (+18.3%).
Drilling down into the biggest changes in the top spending sub-categories, BIA’s updated 2022 forecast shows some key shifts that reflect the supply chain situation, trends in consumer spending and a strong political year. From its original 2022 estimates, top changes in the forecast reveal:
Tier 1 - Automotive Manufacturers (OEMs) has been adjusted down -17.6% to $3.9 billion (from $4.7 billion). Overall, for the entire automotive industry, BIA lowered the updated ad estimates by $1.4 billion for a total of $12.4 billion That still indicates some growth from 2021 (5.5%) but is significantly down from original estimates.
Leisure areas like Airport, Cruises, and Other Travel; Fitness and Recreational Sports Centers; and Performing Arts Companies are all experiencing significant growth in ad spending from last year to this year, BIA says. “Pent-up demand for travel and entertainment are driving growth in these areas but may be tempered by late summer due to inflation and other economic concerns,” the firm says.
Local political advertising spending was raised to $8.6 billion with local television getting a large share of the spend.
BIA’s VP Forecasting & Analysis, Nicole Ovadia says their forecast shows the economy playing out in local advertising. “People saved money during the pandemic and now are enjoying different areas in the leisure and recreational verticals,” Ovadia said “People are spending on vacations and activities, and even going back to the gym. In all these areas, including political, we increased local advertising expectations. For businesses that have a direct reliance on supply chains, we have lowered expectations.”
Ovadia says it will continue to monitor the situation throughout the summer and fully expects it may have to revise its estimates “because the economy is in such a state of flux.”