Magna Predicts 3.4% Growth In Ad Market This Year Thanks To An Auto Ad Comeback.
Economic uncertainty continues to hang over the advertising market, but thanks to some resilient and reemerging verticals, Magna has released its revised outlook for 2023 and it shows only a marginal reduction in the growth rate forecast. In its new 2023 scenario, Magna expects little or no growth in the first half, followed by a recovery in the second half as the economy solidifies, and advertising comps become much easier. Overall, full-year advertising revenues are now expected to grow by 3.4% compared to 3.7% in previous forecasts. Magna projects total ad spending will hit a new all-time high of $326 billion.
“In a similar economic climate, 10 or 20 years ago, the U.S. advertising market would almost certainly fall off a cliff. Things are different in 2023 because of media innovation fueling marketing demand,” said Vincent Létang, Executive VP of Global Market Research at Magna. “The organic drivers that boosted the ad market in 2021 and the first half of 2022 are still around and mitigating the impact of stressful economic signals.”
Magna sees a mixed bag for the two sides of audio advertising. It says overall audio ad spending will “stabilize” at around $17 billion this year. But while AM/FM radio ad spending is expected to contract by four percent, digital audio ad spending is forecast to grow nine percent.
Magna says podcasting ad spending is on track to grow 16% this year, although that represents a six-point slowdown compared to its earlier outlook for the segment. “The channel has not been immune to the general advertising market slowdown, despite continued interest and adoption,” it says.
Digital advertising overall is forecast to grow nine percent this year, while linear advertising formats are predicted to see their ad dollars decline four percent since Magna sees traditional media as more vulnerable to the uncertain economic environment.
‘The Grand Auto Comeback’
For the past three years, the car industry has suffered from closures to supply chain issues, which have cut into sales and all but dried up auto advertising. But Magna says a recovery in the auto market is underway, what it calls the grand auto comeback, which it says will bring back automotive marketing and advertising activity.
Despite the economic slowdown and low consumer sentiment, car sales have already started to recover in the second half of 2022, and Magna anticipates car sales will grow by about 10% this year. A forecast that will likely lead to a 10% to 15% increase in advertising spending by automakers and local car dealers.
“Now that inventory is recovering and price increases have slowed down, millions of households will finally be able to replace their old cars, crowding websites and dealerships; brands and dealers thus need to ramp up marketing and advertising channels to compete to attract them,” it says. Furthering the need to spend on marketing, Magna says brands and dealers can no longer assume consumers will be as loyal as they were pre-COVID and before electric vehicles became more widely available.
“The transition to electric vehicles also means brand loyalty is shrinking and brands – whether generalists or electric specialists – must intensify their marketing and advertising efforts to maintain their share of voice and intent,” said Michael Leszega, Associate Director of Global Market Intelligence at Magna.
While auto marketing is heading in one direction, Magna expects several other industry verticals to slow or cut advertising spending. It says sectors like retail, restaurants, consumer packaged goods, and food and drinks are likely to cut how much they spend with traditional media and grow their overall budgets but just a few percentage points. The banking crisis could bring a hit to the financial category, although improved insurance spending means the segment will grow five percent overall. Travel and movies are also expected to continue their post-COVID recovery with higher spending that a year ago.
Magna’s latest update also included its final estimates for 2022 ad spending. It calculates that the total U.S. ad market grew 5.7% in 2022 excluding the impact of cyclical events like the political season and sports events. Including those, ad spending jumped 7.2% to reach a new all-time high of $315 billion.
The growth came despite what it says was a stronger-than-expected slowdown during the fourth quarter when a significant slowdown following 2021’s abnormal year of growth had already been forecast. Magna says the total ad market was essentially flat during Q4, growing 0.8% year-over-year.