Russia’s ongoing war with Ukraine will slow advertising growth in the U.S., according to a newly revised ad forecast. In its spring update, Magna says media ad spend will increase by 11.5% this year, down a single percentage point from its earlier pre-Ukraine forecast of 12.6% growth. Excluding cyclical effects like political, 2022 growth will be 10%, down from 28% during 2021. Despite the downward revision, total ad spend is still expected to surpass the $300 billion milestone for the first time, clocking in at $320 billion.
With Ukraine, economic growth will be slightly lower, says Vincent Létang, Executive VP of Global Market Intelligence at Magna. “It is too early to assess the depth and length of economic repercussions, but Magna believes the U.S. economy is strong enough to weather this new challenge,” he adds.
Létang says the Ukraine crisis “has already hit consumer and business confidence,” and those factors are considered in Magna’s revised ad forecast. Advertising is expected to suffer in automotive and other categories already hit hard by supply chain issues. Yet the technology, telecom, entertainment, travel, and betting sectors are poised for growth.
Despite the economic and geopolitical uncertainty, Magna singles out some categories that could offset the slowdown, led by political. The updated forecast calls for total political ad spending of $6.2 billion in the midterm election cycle, a stunning 41% increase over the 2018 midterm elections. Local television will grab the largest piece of the pie at $4.2 billion (+26% over 2018), with direct mail in store for $600 million and digital media formats collecting $1.5 billion.
In addition to political spending, Magna says ballot measures will bring millions of dollars into local and digital media. Already 77 statewide ballot measures are scheduled for the November election on topics ranging from marijuana and sports betting to abortion, the environment and voting rights.
Audio Spending To Rise 5%
The revised forecast calls for 5% ad growth for cross-platform audio, which encompasses broadcast radio, streaming and podcasting. Broadcast radio revenues are anticipated to be flat, while digital audio is poised for 15% growth. “Audio media will also suffer from the continued weakness of the automotive vertical but benefit from the recovery of consumer mobility and the growing adoption of digital audio,” Létang says.
Local TV ad billings will fare better than national. Magna predicts 6% growth for local TV, thanks to record political ad spending and despite continued weakness in one of its biggest categories – car dealers. National TV ad billings are forecast to stabilize at -1%. That breaks out to a 5% decline in traditional ad sales and a 27% surge in advertising-supported video on demand, over the top and connected TV.
Most media types will grow ad revenues again in 2022, including search (+17%), social (+16%), OOH (+11%) and cross-platform video (+8%).
Looking back on 2021, Magna says U.S. ad revenues jumped by a record 25% to $287 billion. But after torrid growth early in the year, the upswing abated to 14% in fourth quarter. This after 26% year-over-year growth in third quarter and 46% in second quarter. Audio certainly benefitted from last year’s recovering ad market with 26% year-over-year growth when combining linear broadcast ad sales with those of streaming audio and podcasting.