AI will impact at least half of all ad revenue in 2023, GroupM predicts

GroupM is still predicting mid-single-digit growth for global advertising revenue in 2023, despite concerns about inflation and global economies still recovering from the worst of the COVID-19 pandemic. The WPP-owned agency expects the international ad industry to grow 5.9%, excluding U.S. political advertising, according to its 2023 Global Mid-Year Forecast. This prediction is unchanged from its December forecast, as the nominal growth seen in 2023 is offset by the rise in inflation. Meanwhile, one of the biggest changes to hit the advertising marketplace this year is the growth in artificial intelligence. AI is expected to touch at least half of all advertising revenue in some way by the end of 2023, according to the report, and the agency believes it will disrupt more than media optimization in the coming year. As the prevalence of AI increases, so too will AI-backed start-ups, which GroupM expects to see a “superbloom” of over the next two to five years. Many consumer-facing companies are expected to use advertising to acquire users and grow revenue. But with technological advancements leading growth, GroupM’s forecast calls for the implementation of appropriate safety measures as the use of AI in the industry rapidly increases. “We have elements within the agencies like GroupM's co-pilot that have been looking across platforms at AI optimization and tools, but the inflection point is different as [AI] grows much more broadly across use cases and channels,” said Kate Scott-Dawkins, global president of business intelligence at GroupM, who authored the report. “I think it is something that we continue to discuss and watch and plan for.” AI marketing blog How brands are using ChatGPT, DALL-E 2 and other tools Read more here Areas of growth Retail media has become the third-fastest growing advertising channel in 2023, behind digital out-of-home and connected TV. It is expected to grow 9.9% to reach $125.7 billion in 2023, and is forecast to exceed TV revenue—including CTV—in 2028. Digital is still the most dominant advertising channel, forecasted to grow 8.4% in 2023 and reach 74.4% of total ad revenue by 2028. Connected TV adoption is growing rapidly as consumers jump on streaming platforms and advertisers follow, with growth predicted to reach 13.2% globally in 2023. CTV is expected to add 10.4% in ad revenue between 2023 and 2028 on a compound annual basis. In markets that have a more mature TV industry, such as the U.S. or U.K., CTV takes up even more of the market share from linear TV. The only exception is sports on linear TV in the U.S., which represented 21% of the time Americans spent watching national linear TV, up from 15% just four years ago. As traditional out-of-home continues to recover from the pandemic, the channel is expected to surpass the 2019 revenue levels for the first time and is expected to grow 26.1% in 2023, boosted by digital. Cannes Lions coverage Follow our live blog here Sign up here for email updates See all of the Grand Prix winners here No news is good news Overall, the industry is normalizing after the growth boom that followed the drop during the pandemic, Scott-Dawkins. “No news is still good news,” she said. “The biggest impact to certainly some segments of the advertising world … has been the rise in interest rates,” said Scott-Dawkins. “But it’s been our position that we would be able to manage a soft land … or at least the promise of recession keeps getting pushed back.” Last year turned out to be slightly worse than GroupM originally predicted, with the U.S. seeing 5.7% growth instead of the 7.1% increase the agency had forecasted. Citing a “lousy six months” that featured challenges for America’s regional banks, consumer price inflation and squabbling of the deal to raise the debt ceiling, GroupM predicts 2023 will bring 5.1% industry growth in the U.S., trailing the IMF’s U.S. gross domestic product forecast calling for 6.1% growth. GroupM predicts only 5.1% growth in the U.S. in 2023, trailing the 6.1% increase IMF predicts for U.S. gross domestic product. But Scott-Dawkins is optimistic that the second half of 2023 will bring recovery as the U.S. sees the tail end of supply chain issues, a slowdown in inflation and consumers able to pick back up on spending. Other markets are seeing stronger rates of growth, with China now expected to grow ad revenue by 7.9% in 2023, an increase from GroupM’s December forecast of 6.3%; Brazil was revised up to 6.6% from 3.8%; and the Middle East and North Africa up to 6.2% from 4.2%. Previously, IPG Mediabrands' Magna slightly reduced its 2023 forecast, predicting U.S. ad sales will rise 3.4% to an all-time high of $326 billion. It had previously predicted 3.7% growth for the U.S. in December 2022, but media innovation, including the rise of retail media networks, is staving off an ad market collapse. Dentsu also trimmed its 2023 global growth forecast. It predicted 3.3% growth to $727.9 billion, a decrease from its 3.5% growth prediction, which was adjusted to account for hyperinflation in some markets from Dentsu’s December 2022 report, which predicted 3.8% growth. Check out the latest Ad Age events and award programs

AI will impact at least half of all ad revenue in 2023, GroupM predicts

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