Magna trims industry growth expectations for 2022 and 2023 amid economic worries

Amidst economic uncertainty and challenging geopolitical conditions, IPG Mediabrands’ Magna is pulling back on its growth forecasts for global ad markets for 2022 and into 2023. Global ad revenue in 2022 grew by 6.6% to $795 billion, Magna reported in the December update to its advertising forecast, thanks to cyclical spending from U.S. and Brazilian elections, the Winter Olympics and the FIFA World Cup. The growth fell short of the 9.2% increase, to $816 billion, it predicted in its summer global ad forecast. Magna now expects 2023 global ad revenue to increase by 4.8%, to $833 billion, down from the 6.3% growth target it gave in June. A large source of digital weakness is social media. Global social media ad sales grew by just 4.4% to $149 billion in 2022, a far cry from the growth rates of 20% to 35% observed in the previous three years, according to Magna. A more competitive environment and other data hurdles such as adapting to monetizing vertical video formats on TikTok, YouTube and Instagram have slowed the growth rate of new money injected into the space in 2022. Sign up for Ad Age newsletters From influencer marketing to agencies, get the latest news and analysis delivered to your inbox Click here Magna also lowered its expectations for spending increases on digital ads. But the share of global ad budgets focused on traditional media remains strong. Global digital ad revenue will still lead growth and is expected to reach 74% of all ad budgets by 2027 compared to 65% in 2022, but this year the growth gap between traditional and digital media is only 6%, showcasing companies' continued reliance on TV and other traditional formats. Vincent Létang, Magna’s global market research executive VP, declined to discuss Twitter, which has seen major advertisers pause ad buys since Elon Musk bought the company. More modest gains in overall global ad revenue can be largely attributed to the market stabilizing after the volatile ups and downs of pandemic recovery, according to Létang. “We were always expecting growth rates to slow down with such crazy comps,” he said. In the U.S., the advertising market grew by 8% to $318 billion in 2022, thanks again to cyclical spending on elections and sporting events. With the midterms in November, U.S. political advertising spending grew by 66% over the previous midterms, generating $7.4 billion in net incremental ad revenue for media owners. But for 2023, Magna expects the U.S. growth rate to be below average, growing 4% to $330 billion, because of glacial GDP growth, inflation and the lack of cyclical spending. Check out the latest Ad Age events and award programs Spending on advertising in the entertainment, travel and betting industries will continue to be driven by post-COVID recovery and regulatory relaxation, Magna predicted. And the automotive industry, which had slowed in 2021 because of inflation and supply chain issues, could start to recover in 2023. Létang attributes this to car companies playing the long game and focusing their campaigns more on educating consumers about electric cars for the future rather than campaigns aimed at selling cars immediately. “I think [car manufacturers] have made the wise decision, instead of just cutting their advertising budgets to save money, they decided instead to use those budgets to advertise electric cars,” he said. “They need to start communicating about their electric offerings because that’s where the market is going in the long term.” TV remains a tumultuous format with the continued erosion of linear reach and live viewing. Magna predicts cross-platform TV ad revenue growth of 1.7% in 2022, to $172 billion, and And forecasts a 4% decrease in cross-platform TV ad revenue in 2023 since TV will lack the injection of ad dollars from elections, the Winter Olympics and the World Cup. A potential bright spot on the horizon: The threat of economic uncertainty will have advertisers moving away from subscription-based media models and toward ad-supported media. The launches of ad-supported tiers from Disney+ and Netflix could provide an opportunity for more than $1.2 billion of global revenue in 2023, which will drive connected TV growth to 29%, Magna predicts. “Just a few years ago Netflix would have said ‘advertising is not in our DNA,’ but the fact that they’re doing it now is a testament that ad supported business models for media are coming back with a vengeance,” Létang said. “Everybody in the ecosystem suddenly remembers that it’s a beautiful business model because a great many people are happy to pay less for a little bit of ads.” Out-of-home media has made a complete recovery from pandemic lows in U.S. markets, and will see a full global recovery in 2023, growing 6% to $33.5 billion, according to the report. Magna credits the return of consumer mobility for the recovery, with people back to using air, car and transit travel.

Magna trims industry growth expectations for 2022 and 2023 amid economic worries

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