Stronger Economy Leads Magna To Raise Ad Outlook; Digital Audio Growing Faster Than Broadcast.

Buoyed by an improving economic outlook, the ad giant Magna is revising its outlook for this year. It predicts total U.S. ad spending will climb 6.7% compared to a year ago, which is a one-point upgrade from its December forecast. When political and other cyclical spending is included, Magna is forecasting an even larger 9.2% growth rate for 2024.

“The outlook for 2024 looks stronger as economic indicators have improved recently,” said Vincent Létang, Magna’s Executive VP Global Market Intelligence and author of the report. He points to slowing inflation and GDP growth that has now increased in the last three updates. 

Magna forecasts first half ad spending growth will be in the 7% to 8% range versus last year. And while Létang thinks the overall ad market will increase at a slower pace during the second half, the impact will be mitigated by the influx of political dollars.

This year has also gotten going with a welcome tailwind. Based on Magna’s analysis of media companies’ financial reports, it believes core advertising spending jumped 9.1% during the fourth quarter of 2023, making it the strongest quarterly growth rate in nearly two years. That brought full-year 2023 ad market growth to 5.7%.

Overall Audio Ad Sales Stabilize

Magna’s outlook offers fresh motivation for sales teams to focus on digital. While it predicts over-the-air radio ad spending will decline 3.3% to $12.6 billion this year, Magna also forecasts digital audio sales will climb 4.4% to $3.3 billion. The result is overall audio ad sales will be stable at around $16 billion. 

The outlook notes digital audio usage and ad sales continue to develop, but growth rates are maturing. It estimates streaming audio ad sales will climb six percent this year. As many podcasters are embracing video, Magna says short form digital video ad sales, mainly on YouTube and Twitch, will grow 12% this year. And long form streaming ad sales will climb 13%.

The hottest ad category this year is arguably political. Magna predicts the 2024 election cycle will generate $9 billion of additional ad revenue for media owners. Michael Leszega, Magna’s Director of Global Market Intelligence, says that will not only deliver dollars directly into the pockets of media owners, especially in battleground states, but it will also put upward pressure on CPMs. “Fundraising at the end of February is actually down compared to the previous presidential cycle, but there's still plenty of time left for fundraising to catch up, and the polarized political environment should again facilitate that growth,” he said.

Beyond political, Magna predicts most industry verticals will increase their ad spending this year. The list is led by retail (+9%), travel (+9%), food and drinks (+6%), and automotive (+6%). Magna says consumer packaged goods companies benefit from the stabilization of production costs and consumer prices, while automotive marketing is still driven by the transition to electric vehicles.

The entertainment category is one of the few Magna expects will be down this year. It thinks Hollywood and the TV streamers will release and advertise fewer-than-usual new shows and movies due to the 2023 Hollywood strike delaying production, as well as cuts in production volumes as media companies focus on controlling costs.

Magna says once again digital pure players will capture most of the market growth in 2024, with non-cyclical advertising sales growing 12% while the advertising revenues of traditional media owners will grow 3.5%.

Among the digital pure players, it says search, retail, social and short form video will once again capture most of the growth. And artificial intelligence is helping. Magna predicts social media sales will climb 14% this year as AI is becoming an increasingly important tool used by advertisers to set up, run, and optimize their social media campaigns. Magna is looking for this to drive additional sales in 2024, especially for small businesses setting up their first campaigns. 

“The improvement in ad spend over the last two quarters has mostly benefited digital media owners rather than traditional media companies,” Létang said. As a result, Magna says not every media channel will benefit from the same level of ad growth. “In fact, most of the growth will accrue to digital pure play using search, social media and short form video like Google, Amazon and TikTok,” he said. “On the other end, the non-cyclical advertising sales of traditional media owners – TV broadcasters, audio, publishing, and out of home – will continue to erode by approximately 3% this year, but thanks to strong cyclical ad spend, their ad revenues will stabilize or increase slightly.”