Radio advertising sales in the U.S. are forecast to grow 19% in 2021 to $11.0 billion, and a further 3% to $11.4 billion in 2022, according to the just-released fall 2021 report from Magna, the intelligence arm of Interpublic Group's Mediabrands. The forecast is driven by an 80% increase in the second quarter of 2021, including a 98% gain for Audacy and +88% and +68% for iHeartMedia and Cumulus Media respectively.
“While it’s true that many dollars are going to digital, we also see demand returning to radio,” Magna Associate Director, Global Market Intelligence Michael Leszega says. “The economy is very strong right now, and we see every vertical increasing spending.” Other drivers of Magna's forecast include more people returning to commuting to work and listening in cars, a full year of high vaccination rates, and growth of new verticals such as sports betting, which Magna notes is growing in size and popularity and increasing ad spend as a result. “Too few states have legalized sports betting at this time to justify national advertising, so the vertical remains local and has increased spend in radio and local TV,” says Leszega.
Total audio ad revenue is expected to grow 25% for 2021, Magna says, as iHeartMedia anticipates ad sales to continue to increase in third quarter at a +20% rate over Q3 2020. Audio’s upward trajectory is on track to increase 5.8% for 2022, compared to 11.6% for all media. Only search (35.5% 2021, 15.5% 2022) and social (36% 2021, 16.7% 2022) show larger estimated gains.
Magna's overall U.S. ad spend forecast – up 23.2% to $278 billion for 2021 and, powered by the winter Olympics and midterm elections, another 11.6% in 2022 – has spend poised to reach the $300 billion mark for the first time next year. Olympics and midterms are expected to bring an additional $700 million and $6 billion in ad spending respectively, with total spending to hit $310 billion. While Magna's earlier forecast put 2021's ad spend growth at 15%, the improving economy has pushed that to the current 23.2%. The forecast expects most major ad categories to return to pre-COVID marketing investment levels, as long as supply constraints affecting several of these industries do not continue to worsen, and that COVID restrictions that have impacted travel, restaurants and theaters continue to ease.
At the same time as radio shows key ad revenue drivers, Leszega also points out its short- and long-term inhibitors. “The biggest in the short term is the chip shortage facing the auto industry,” he says. “Automotive advertisers, like car dealerships, are not going to advertise for inventory they do not have.” For long-term, it's demand. “Radio is predominantly a local channel, and in general we have seen local advertisers move away from these channels (like radio and local TV) and towards the lower funnel digital direct channels of search and social. We believe that the pandemic has accelerated this shift. Brick-and-mortar is being de-emphasized for e-commerce, and local advertisers will shift budgets to search (like Amazon’s search product) and social as a result.”