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Revised MoffettNathanson Ad Forecast Calls For 13% Growth Through 2025.

MoffettNathanson has updated its U.S. ad market forecast and while still bullish, it calls for a slightly more moderate growth rate. The latest figures from the firm’s AdTracker call for ad growth to surge at a compound annual growth rate of 12.7% through 2025 and reach an historic ratio of 1.64% of gross domestic product by then. That’s down slightly from its earlier forecast of a 13.8% annual growth rate.

The largest downward revision is for online advertising, which is now expected to increase 19.5%, down from 21.6% predicted earlier. Meanwhile, the updated outlook for ad-driven video on demand (AVOD) calls for the fast-growing sector to surge 44.3%, up from 42.6% previously.

In contrast to the uncertainty around the future of digital advertising, MoffettNathanson is keeping its 2022 growth rates intact for traditional media, which is expected to rise 3% year over year in 2022. While it expects linear TV ad spend to decline at an annual rate of 1% over the next four years, it sees top of funnel advertising growth in outdoor, “which should benefit from more people traveling and returning to offices in person this year,” the forecast says.

The firm says radio revenues rose 33.0% year-over-year in fourth quarter 2021 to $1.35 billion. Radio was second only to outdoor (+45%) and video on demand AVOD (+39%) among media channels with the largest year-over-year growth rates. Radio also out-paced the 16% total media growth rate in fourth quarter 2021.

According to MoffettNathanson’s estimates, U.S. radio revenues rose to $15.9 billion in 2021 from $12.8 billion in COVID-battered 2020.While that marks a 25% year-over-year rebound, the industry has not yet recovered to its pre-pandemic level of $17.0 billion in 2019. The firm forecasts $15.5 billion in revenue for radio in 2022, which would be 9.1% below its 2019 level.

The new forecast, entitled “U.S. Advertising: Re-Examining Our Wide-Eyed Optimism,” predicts so-called bottom of the funnel advertising to grow at a faster rate (+19%) than middle of the funnel advertising (+17%).

While bottom of the funnel advertising, meaning precisely targeted ads that result in converting prospects into customers, accounts for a larger share of the market today (32%) than middle of the funnel ads, which promote consideration (22%), the forecast is for the bottom of the funnel to grab even more share over the next four years, reaching 40% of the U.S. ad market by 2025 compared to 26% share for the middle of the funnel. While MoffettNathanson shows a major decline in the share of top of funnel ad spend (ads that drive awareness and brand building) from 39% in 2021 to 22% in 2025, it’s not because of a meaningful absolute decline in advertising dollars spent. “Rather, top of funnel’s declining share is due to double digit growth from digital platforms further down-funnel,” the report says.

The MoffettNathanson Ad Tracker is based on publicly-reported, quarterly financial results from 43 U.S.-listed, large-cap, advertising-supported media companies that collectively had around $240 billion in ad revenue in 2021, or around 83% of the total U.S. measured-media market.

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