Magna trims industry ad spending forecast to 3.4% growth

Magna slightly downgraded its growth forecast for the U.S. ad market in 2023. The IPG Mediabrands agency now expects 2023 ad sales to rise by 3.4% compared with the 3.7% it previously predicted for the U.S. in December 2022. The company anticipates little to no growth in the first half of the year, followed by a reacceleration in the second half, bringing U.S. ad revenue to an all-time high of $326 billion in 2023. That spending pattern contrasts with its findings for last year. In March, Magna reported that U.S. media owners' advertising revenue grew 6% in 2022 to $315 billion. But most of those gains were made in the first half, and by the fourth quarter of 2022, ad sales were flat year over year. Check out the latest Ad Age events and award programs The U.S. economy is in “decent” shape, according to Vincent Letang, head of global market intelligence at Magna, but marketing and advertising is always vulnerable in times of economic slowdown. “Inflation slowly receded and GDP growth was decent in the second half [of 2022],” Letang said in a report presentation. The ad market also won't get a boost in 2023 for cyclical ad spending events—there are no elections or Olympics this year—which usually account for about $7 billion in ad spend during even-numbered years. Although recent financial turbulence from the banking crisis may hurt consumer and business confidence, Letang said “the economic fundamentals have improved in the first quarter” with unemployment remaining under 4%. Related: U.S. ad business cut 1,000 jobs in February “In a similar economic climate 10 or 20 years ago, the U.S. advertising market would almost certainly fall off a cliff,” Letang said. “Things are different in 2023 because of media innovation fueling marketing demand.” Helping fuel the market is the expansion of ad-supported, long-form video streamers, such as new ad tiers from Disney+ and Netflix, along with retail media networks that are channeling marketing budgets into digital media. Also read: Streaming TV advertising in 2023 “With long-form OTT streaming going mainstream and [becoming] increasingly ad-supported, brands finally [are finding] cost-effective solutions to reconnect with audiences that had become hard and expensive to reach through linear television,” Letang said. Search will remain the largest ad format for brands, growing revenue 10% to $125 billion in 2023, followed by digital media formats, which are predicted to increase 9% in spending. Magna expects retail media advertising revenue will grow 15% to reach $41 billion in 2023.Read more: Retail media's measurement standardization issue Check out the latest Ad Age events and award programs Where digital is gaining ground, linear formats continue to lose—Magna expects a decrease of 4% in that sector. Also mitigating the impact of the economic slowdown is the recent bump in consumption and retail sales and the reduction of supply issues as the economy continues to recover from the pandemic. Car sales have started to grow again, and Magna expects a 10% to 15% increase in advertising spend by car dealers and car brands—the fifth largest category for digital media. Out-of-home remains the strongest traditional media format, with expected 6% growth thanks to digital and programmatic innovations, expanding brand opportunities and the continued resilience of local businesses, which contribute half of all OOH ad sales. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here

Magna trims industry ad spending forecast to 3.4% growth

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