The U.S. economy has proved to be “fairly resilient” as it has so far avoided recession. GroupM says digital advertising has continued to increase its share despite slower growth rates this year, and in the agency’s new outlook it predicts digital will account for two-thirds of total ad revenue within the next two years.
“Audio, newspapers and magazines combined will account for just 11.2% of all U.S. advertising revenue in 2022,” says the GroupM year-end update. “Declines in terrestrial audio will be offset in 2022 by gains in digital audio, which is likely to represent a third of the total medium.”
In the U.S., GroupM now forecasts a 7.1% growth rate for this year – excluding the impact of political ad spending – which is lower than the 10.1% outlook it forecast in June. “Barring an escalation of the war in Ukraine or another COVID-19-sized global disaster, we expect growth to climb mildly in 2024 to 6.2% before returning to a trend of decelerating mid-single-digit growth through 2027,” the report says.
GroupM also estimates global advertising growth of 6.5% in 2022 which is a significant deceleration from the 24.4% growth recorded last year. It is also a downgrade from the 8.4% growth rate it projected in June with much of that attributed to factors beyond the U.S. borders, namely China.
GroupM says audio advertising worldwide is projected to grow 3.8% in 2022. But it forecasts that growth rate will fall back to 1.3% growth in 2023. Digital audio now represents nearly a quarter of total audio advertising revenue and is forecast to grow by double-digits in both 2022 and 2023. And GroupM says that growth will roughly offset the decline of terrestrial radio through 2027.
“Podcasts, while generating interest and experimentation among publishers and marketers, remains difficult to measure effectively which may constrain future growth,” it says.
Nevertheless, the report points out that digital audio now accounts for nearly a quarter of audio spending worldwide, and it is growing much faster than the channel as a whole.
GroupM thinks companies whose business is primarily online will continue to be responsible for the rise and disproportionate advertising spending growth. They include sports betting, online travel booking, dating, ride hailing and fintech companies. The firm says such companies tend to be “higher intensity advertisers” — as they spend more on marketing and advertising than the businesses they have replaced in their sectors. GroupM says they’re sometimes pouring as much as half of revenue into sales and marketing activities.
Yet that “grow at all costs” mindset is under pressure in an uncertain economic outlook, and GroupM says that is likely to lead to a deceleration in advertising growth among that group. Two noteworthy exceptions are sports betting and travel, which it says have maintained sales and marketing budget growth this year.