Despite all the uncertainty about the economy heading into 2023, GroupM sees reasons to be optimistic about the advertising market. “The narrative surrounding the health of the global advertising economy is not altogether negative,” the WPP-owned Media Investment Group says in a preamble to its latest global advertising forecast.
GroupM is calling for worldwide advertising growth in 2022 to come in at 6.5%, excluding U.S. political advertising. That’s lower than its June forecast when it estimated 8.4% growth. But the downward revision “is primarily the effect of lowered China expectations,” it says. Ex-China, growth is forecast at 8.1% for 2022.
Much like radio stations are better off looking at a quarterly ratings estimate rather than making programming decisions based on a single monthly, that principal also applies to ad forecasting. GroupM says a three-year compounded basis “essentially [smooths] out the volatility of the pandemic and the general up-and-down nature of the advertising market.” Despite all the negativity in the headlines, GroupM estimates the three-year compound annual growth rate for total advertising from 2019-2022 is at 8.8%, nearly identical to the 8.7% rate from 2016-2019.
The media investment firm offers these four reasons for being optimistic as the calendar flips from 2022 to 2023:
Large declines appear limited to select channels in select markets.
Large advertisers are seeing revenue gains despite voicing caution.
Unemployment remains low and new business creation remains a source of growth.
Digital media continues to grow.
Looking ahead to 2023, it forecasts global advertising to grow 5.9%, with solid gains in connected TV, retail media and fast-growing markets like India. While that represents a slight downgrade from the 6.4% estimate GroupM shared in June, it expects growth to climb in 2024 to 6.2%, as long as there is no escalation to the war in Ukraine or another pandemic-sized global disaster. After that it anticipates returning to a trend of decelerating mid-single-digit growth through 2027.
GroupM notes that the difference between its current estimates and the June forecast mainly boils down to changed expectations for China, which has gone from 3.3% growth to 0.6% decline, and for the U.S., where it is now calling for 7.1% growth (excluding political advertising) versus 10.1% in June. These two markets alone will make up 55.5% of all advertising revenue in 2022.
In a sobering stat for the television industry, GroupM says all pay TV providers combined will reach fewer than half of homes in the U.S. by 2025. The report closes with a pair of eye openers: retail media (digital ad networks from retail giants like Walmart, Amazon and Walgreens) are on track to reach $110.7 billion this year, up from its September estimate of $101 billion. And Google and Facebook parent Meta captured 42.7% of all advertising (not just digital) in 2022, excluding China.