The outlook for combined audio advertising, which includes broadcast radio, streaming and podcasting, is on track to increase by 5% in 2021.
Magna released its updated forecast for 2021 ad revenue, which projects digital audio advertising will grow 7.5% this year. That is a half-point improvement over its earlier forecast released in December due to a stronger economic outlook, supported by the new stimulus package, well-pacing COVID decline, and a return to normal sports events. “Digital ad formats will capture two-thirds (67%) of total advertising sales for the first time,” Magna said in its update.
“Our final estimate for U.S. advertising revenues in 2020 confirms that digital marketing was not only resilient but thrived in the COVID, as the organic growth factors all accelerated,” Vincent Letang, EVP of Global Market Intelligence, and author of the report, remarked.
It’s not just digital audio that is improving, Magna forecasts broadcast radio revenue will increase 2.1% this year, up from an earlier 1.4% projection. Overall non-political linear ad sales (TV, radio, print, OOH) will grow by +1% to $77 billion (including cyclical spending), while digital ad sales (search, social, video, display, audio) will grow by 13% to $161 billion.
Beyond audio, Magna has increased its outlook for 2021 across all forms of advertising. It forecasts U.S. ad spending will increase 6.4% to $240 billion this year. That is 2.3% above the previous Magna forecast due to a stronger economic outlook, supported by the new stimulus package, declines in COVID rates and a return to normal sports events.
“The latest economic and business outlook for 2021 gives us confidence that most industry verticals will grow ad spend again, up and down the funnel, and that will benefit nearly all media channels this year,” said Letang.
Quarter By Quarter Breakdown
On a quarter-by-quarter basis, Magna estimates first quarter ad spending will be up 6% from a year ago, and by a much stronger 15% during second quarter against historical lows set last year during the pandemic’s early days. It projects another 6% growth rate in third quarter, with a more modest 2% gain expected during the fourth quarter.
The fourth quarter of 2020 was exceptionally strong, based on the analysis of financial reports from media companies, due to economic stabilization, strong holiday sales and record political spending in October, Magna says. “Year-over-year ad revenue growth reached +12% (still +8% excluding political), but that was entirely driven by – and captured by – digital ad formats (+24%) while linear ad spend were down again (-5%),” the report read.
“The strongest ad spend growth rates will come from Travel, Automotive, Drinks, and Movies, following heavy ad budget cuts in 2020,” the report says. It notes the total ad market is recovering more quickly than during the 2008-2009 recession which saw nine consecutive quarters of ad declines compared to just one during the pandemic.
Magna has also published its final estimate for the U.S. media owners’ net ad revenues in 2020 that shows even “greater resilience” than previous estimates. It says the ad market was essentially stable in 2020 with a 1% growth rate.
The near stability of the ad market in 2020 was helped by an all-time high in political advertising. Political campaigns contributed $7 billion of incremental ad revenues for media owners (+75% vs 2016). As usual, local television attracted the bulk of political spending but digital political campaign spending grew almost threefold from 2016 to reach $1.5 billion. Non-political growth was also better than expected, declining by just 2%.