Thanks to fluctuations and volatility, an advertising forecast that came out last month – or even last week – may no longer be an accurate barometer. Case in point: In a forecast preview last week, Borrell Associates said local advertising will inch up 0.6% in 2023. But by the time it formally released its 2023 local advertising forecast this week, the number was revised upwards by almost three points. Now the local media financial advisory firm says total local advertising will climb 3.2% next year. “We have new information that puts local spending at a far higher rate that we had thought,” CEO Gordon Borrell says.
In other words, when evaluating advertising forecasts these days, remember that they represent this particular moment in time.
Despite all the flux, one thing that hasn’t changed is digital advertising (+7.7%) will continue to grow at a faster rate than non-digital (-5.9%).
“When we look at local advertising and where dollars are being spent and we just put it in two buckets – digital and non-digital – seven out of every $10 is now spent somewhere digitally,” Corey Elliott, Borrell’s Executive VP of Local Market Intelligence, said on a Thursday webinar. That’s a sea change from 2016 when 45% of local media ad spend went to digital and 55% to non-digital.
Among traditional media, radio is forecast to have one of the smallest year-over-year ad declines, down 2% in 2023. That’s small potatoes compared to local TV, which is forecast to tumble 18.0% after a very robust 2022, followed by directories (-8.7%) and newspaper (-7.1%).
Meanwhile, one of next year’s biggest gainers is digital audio, which is expected to see a 10.4% increase in local advertising expenditures. Streaming Video/OTT is poised to show the most growth (+12.6%) in stark contrast to local TV which is on track for the biggest decline of any media channel.
Search, OTT video, targeted display advertising and listing sites are on track to be the top spending formats in 2023, per Borrell.
Beyond its new ad spending forecast, the latest Borrell data also drills down into retail sales which are currently looking strong. Elliott called 2022 “the best year we've had, by far” for retail sales. “There's a lot more businesses, there's consumer spending, there's inflation – all of this factors into this.”
But every business category has a different story to tell. Hardware stores enjoyed a big spike in 2020 due to COVID, when millions of Americans decided to fix up their homes. That trend continues today. But department stores cratered in 2020 and are now seeing something of a return to normalcy.
A similar trend is unfolding with new car dealers. After a disastrous 2020, dealers were “riding high in 2021,” Elliott said, reaping big profits from inflated prices even with far fewer cars to sell on their lots. Based on recent sales figures, the auto category is looking slightly more encouraging today.
As Inside Radio reported Monday, one of the biggest drivers of retail sales is a massive influx of new small businesses. “It is phenomenal growth,” Elliott said, noting that stats from the U.S. Department of Labor, the Brookings Institute and the U.S. Chamber of Commerce all backed it up.
Borrell Associates says the number of U.S. businesses with fewer than 10 employees nearly doubled, while those with 25 or more employees declined since March 2020. What’s more, 6.2 million “high-propensity businesses” have been formed since 2019. These are businesses the U.S. Census Bureau has designated to be more likely to succeed and grow. “Radio has a perfect story for them – if they want to be connected to the community and they want their brands to rise in awareness, and if they need help with marketing,” Borrell said.
Borrell’s data shows these smaller businesses are more likely to buy digital from traditional media companies. More than one in four (26%) are purchasing digital from a radio station or radio company, compared to 31% who buy it directly from a platform.
However these hordes of new businesses fly below the radar. Rather than trying to find them by buying business lists, a better approach may be to use radio’s broadcast bullhorn to bring them out of the woodwork. More on that strategy is available HERE.
The Borrell numbers are based on advertising expenditures, as opposed to media company revenues. And it isn’t the only forecaster making more frequent revisions to its outlook. Magna Global has said it is changing forecasts on a regular basis and will be revisiting its numbers again in December.