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The MAGNA Global Research team shares key findings from their March 2023 U.S. Advertising Forecast. The report marks an anticipated 3.4% increase in all-media revenues as the market continues to grow to a new all-time high of $326 billion.
Based on MAGNA’s analysis of media companies’ fourth quarter earnings, the U.S. advertising market continued to slow down in 4Q22. The slowdown was slightly stronger than expected, as ad spend was essentially flat (+0.8% year-over-year) in the quarter. It is important to keep in mind that the comparison is with 2021, a post-COVID year that was the strongest ever, both in terms of dollar spend and year-over-year growth; with such high comps MAGNA was expecting a significant slowdown following this abnormal year of growth.
On a full-year basis, the U.S. ad market grew by 5.7% in 2022, excluding cyclical advertising. Including these cyclical dollars (political and cyclical sports events), it grew by 7.2% to reach a new all-time high of $315 billion.
Marketing activity and advertising spending are typically vulnerable in times of economic slowdown and low visibility. CPG verticals, which are normally largely immune to declining sales, were hit by inflation and supply issues in 2022. On top of that, there are no cyclical events in 2023, no elections and no major international sports events. That’s about seven billion dollars of cyclical ad spend in even-numbered years (approximately 1.5 percentage point of incremental ad sales) which doesn’t exist in 2023, since very little of that money carries over to odd-numbered years like 2023.
But there are still some drivers to marketing and advertising activity, mitigating the impact of economic slowdown. Consumption and retail sales will be supported by inflation cooling down, and supply chain issues going away gradually. The automotive market is already bouncing back despite high interest rates and consumer anxiety. Some other industry verticals will continue to benefit from post-COVID lifestyle recoveries, including travel and movie-going.
Finally, ad market growth continues to be fueled by organic media technology innovation which funnels marketing budgets into advertising formats.
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