The post-pandemic advertising spending boom has already begun to ebb.
Two of the world’s largest media buying companies forecast a slowdown in the growth rate of ad sales for both 2022 and 2023, citing factors including a slower pace of business in China as well as a downturn by several major ad categories in the face of inflation and the possibility of a recession.
WPP’s GroupM called for global advertising spending in 2022 to increase by 6.5%, down from a forecast of 8.4% in June. The large media investment firm, which buys advertising inventory on behalf of marketers, estimated that global ad spending would grow 5.9% in 2023, down from a forecast of 6.4% in June. Meanwhile, Interpublic Group subsidiary Magna estimates that global ad spending in 2023 will rise 5%, slowing from 7% this year. The forecast was far from 1.5% from a previous forecast in June, and Magna cited a “deteriorating macroeconomic outlook” as the basis for its estimates.
“It’s really starting to slow down,” Vincent Letang, Magna’s executive vice president of global marketing intelligence, says in an interview.
Such projections are likely to exacerbate concerns among the US media, which caught the trend earlier this year during the industry’s annual “primary” market, when traditional media companies try to sell off the bulk of their trading inventory. Many large television owners have agreed to lower-than-expected deals in return for paying a higher volume of commitments from advertisers, a tried-and-true strategy often used when markets are in turmoil or the possibility of a recession begins to loom.
Many TV companies have already begun to pursue layoffs, with Comcast and Warner Bros. Discovery and AMC Networks are among the entertainment players looking to cut costs.
Some of the rising patterns in this period are likely to have far-reaching effects. “In the US, in the final months of 2022, broadcast providers captured nearly all of the most-watched non-live sports television programming, which continues to be dominated by linear networks and cable,” GroupM said in a research note. But with Apple, Amazon, and other non-traditional players entering the market for sports rights, this last bastion of linear viewing will no longer be guaranteed. Sports alone certainly wasn’t enough to stem losses of video customers from cable and satellite providers. We appreciate that the spread Pay TV, including multichannel video program distributors (MVPDs) and virtual MVPDs (vMVPDs), will fall to less than 50% of U.S. television homes in 2025.”
In the United States, advertising sales in 2023 are expected to increase by 5.8%, according to Magna, compared to 6.2% for 2022, as US advertising sales are expected to reach $310.2 billion, excluding cyclical events.
Media companies will face headwinds next year. Magna predicts that financial services companies, grappling with rising interest rates and a downturn in the cryptocurrency industry, will likely back off from the announcements. The company said consumer product manufacturers are likely to spend less next year. And auto advertising’ is a big question mark, because of the uncertainty in the macroeconomic environment and
Magna says. Advertising spending from entertainment and travel marketing companies and betting facilitators is likely to be more robust.
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