Total U.S. ad spend will grow by 3.7% in 2023, according to an updated forecast from Magna. Faced with economic uncertainty, the forecasters at Magna have lowered their outlook by one percentage point from their last U.S. forecast in September. Excluding cyclical ad sales in ‘22 and ‘23, growth in 2023 will be up a more robust 5.8%, barely below 2022’s 6.2% growth.
Audio is expected to stabilize in 2023, inching up 0.5%, after an earlier forecast for 0.8% growth. The growth is anticipated to come from podcasting and streaming audio with broadcast radio in the U.S. on track to decline 4% year-over-year in 2023.
Due to the loss of political, Magna says long-form video advertising will shrink by 8%. Out-of-home will continue to outperform the market (+7%) while publishing formats will essentially stabilize. Search will remain strong (+11%) while social media ad sales will grow again but far slower than its pre-iOS 14 growth rates (+5%).
Thanks in part to post-COVID momentum in consumer spending and mobility, U.S. ad spending kept growing in the first half of 2022 even as the economy stalled. By the time the third quarter rolled around, the economy re-accelerated but that’s when ad spend hit a bump in the road. The result: U.S. advertising revenues increased 11% year-over-year in the first half but slowed to 6% growth in the second half. And half of that second-half growth came from political advertising. Looked at another way, non-political, non-cyclical advertising grew by just 3% in the second half over the same period in 2021.
For full year 2022, the U.S. ad market grew by 8% to reach $318 billion. Without the benefit of cyclical spending – the 2022 mid-term elections, Winter Olympics, and FIFA World Cup – the market growth would have been up 6%. Audio ad sales grew 5.9% to $16.8 billion, with broadcast radio up 2% compared to a 15% uptick in streaming and podcasting ad sales.
2023 Global Ad Spend To Slow To +5%
The U.S. outlook is part of a more expansive global outlook released Sunday by Magna that calls for worldwide ad revenues to slow down to 5% growth to $833 billion in 2023 from $795 billion in 2022 after a 7% increase this year. This new 2023 growth forecast is 1.5 percentage points below the firm’s June 2022 forecast due to a deteriorating macroeconomic outlook.
“Most of that slightly lower revision is due to digital ad spend, which has been reduced by about two and a half percent,” says Luke Stillman, Senior VP of Global Market Intelligence at Magna. “Most of this weakness comes from continued inflationary pressures, geopolitical uncertainty, as well as an overall slightly slower economic environment. But despite this uncertainty, ad spend remains resilient.”
One of the major storylines from the new outlook is how traditional media will remain resilient through the economic uncertainty while social media stalls. “A more competitive environment, and data headwinds have dramatically slowed the amount of new money flowing into social media this year,” Stillman explains. Incremental revenues for social media will be $6 billion in 2023, the lowest since 2014.
Combined ad revenues for television, audio, publishing, and OOH grew 2.5% on a global basis this year, despite the challenging economic environment. Digital media, meanwhile, grew by 9%. “The gap in growth rates with digital advertising growth was the narrowest ever measured by Magna, suggesting that the long-term transition to a digital-centric marketing landscape has slowed down following the COVID acceleration,” says Vincent Létang, Executive VP, Global Market Research at Magna and author of the report. “Marketers continue to value the brand safety that editorial media vendors deliver, combined with expanding cross-platform opportunities.” That said, digital ad formats represent about two thirds of total budgets and will continue to lead growth forward, eventually reaching about three quarters of budgets by 2027.
In another major headline from the forecast, Magna sees the pendulum swinging away from subscription media, and towards ad-supported media. The launch of ad-supported tiers of Netflix and Disney+ will add more than a billion dollars of global revenue in 2023. Stillman says that new money will drive connected TV growth to nearly 30% in 2023, much faster than search at 10% and social media at 7%.
And in good news for radio stations reeling from the loss of automotive ad dollars, Magna sees auto sales stabilizing after months of weakness in the U.S. Rather than slashing ad spend, “auto brands are looking past near term weakness,” Stillman says. “They're looking past supply chain struggles and focusing on building long term brand equity, and consumer awareness.”