MAGNA, the leading global media investment and intelligence company within IPG Mediabrands, has released the Dec 2022 Global Advertising Forecast, analyzing and predicting the size and growth of advertising revenues across 70 markets.
TEN TAKEAWAYS
- The winter update of MAGNA’s “Global Ad Forecast” predicts media owners advertising revenues will reach $833 billion in 2023, +5% growth vs. 2022 ($795bn), slowing down from +7% in 2022. The new 2023 growth forecast is 1.5 percentage points below MAGNA’s previous forecast (June 2022) due to the deteriorating macroeconomic outlook.
- After a strong start of 2022 (e.g. US 1H: +11%), advertising spending slowed down significantly in the second half amidst global economic uncertainty (US 2H: +3% excluding political). Nevertheless, full-year 2022 ad revenues still grew by almost +7% to $795 billion, helped by record levels of cyclical spending (elections in Brazil and the US, Winter Olympics, FIFA World Cup).
- Traditional editorial media companies (Television, Audio, Publishing, OOH) saw their advertising revenues grow by +2.5% despite the challenging economic environment, while digital media companies grew by +9%. This the smallest gap in growth ever observed by MAGNA, signaling that traditional media brands remain attractive and relevant as they now combine brand-safety with cross-platform reach.
- Several industry verticals may slow down marketing expenditure in 2023, e.g. CPG verticals (Food, Drinks, Personal Care) and Finance. Entertainment, Travel and Betting will continue to be driven by post-COVID recovery and regulatory relaxation. Automotive is a big question mark due to the uncertainty in macroeconomic environment and supply issues, but MAGNA believes ad spend will finally start to recover in 2023.
- In that environment, the ad sales of traditional media owners will slow down: Publishing and Television ad sales will shrink by -3% and -4% resp. while Audio advertising will be stable (+1%) and Out-of-Home ad revenues will grow by +6% to reach almost $32 billion, just above pre-COVID total.
- Meanwhile, digital advertising sales will grow by +8%to reach $557 billion dollars i.e. 65% of total ad sales, driven by organic growth factors (ecommerce, media consumption shifts). Digital Video will be the fastest-growing ad format (+11%) followed by Search (+10%), and Social recovering slightly (+7%).
- Television advertising will suffer from continued erosion in linear viewing (-5% to -15%), and the lack of cyclical events following the record cyclical spending of 2022, mitigated by resilient pricing (average CPM costs +10%) and growing AVOD ad sales on broadcasters’ streaming platforms.
- In 2023, APAC advertising revenues will increase by +6% to $263 billion, 23% above the pre-COVID spending level, driven by digital advertising growth (+70%).
- The second largest ad market, China (15% of global advertising revenues), will re-accelerate in 2023 (+7% to $128 billion) following a historically weak performance in 2022 (+3%) due to the zero COVID policy crippling the economy, and regulatory restrictions slowing down digital media.
- Among the world’s top 15 advertising markets the strongest 2023 growth will come from India in 2023 (+14%) and South Korea (+7%). At the other end of the spectrum MAGNA expects very little growth (under +3% all-media, negative for traditional media) in Germany, Italy, Japan, and Spain.
GLOBAL AD FORECAST +5% IN 2023
Globally, MAGNA expects media owners’ advertising revenues will grow by +5% in 2023 to reach approx. $830 billion. This is a slowdown from +7% in 2022 and +23% in 2021. The new 2023 growth forecast is 1.5 percentage point below MAGNA’s previous global forecast (published in June 2022) due to a deteriorating macroeconomic outlook. MAGNA’s June forecast was based on a global economic growth expected at the time to reach +3.6% in 2023 (real GDP forecast from IMF WEO April 2022) but that expectation was since cut down to +2.7% in the latest IMF update (WEO October 2022).
Around the global average growth +5% in 2023, MAGNA anticipates few variations as every region is confronted to the same economic challenges. North America and Western Europe will growth below average, growing by by +3% to +4%, while APAC (+6%) and Latin America (+9%) will grow slightly faster than average. Among the 15 largest advertising markets, the strongest growth will come from India in 2023 (+14%) followed by South Korea (+7%). At the other end of the spectrum, MAGNA expects very little growth (under +3% all-media, negative for traditional media) in Germany, Italy, Japan, and Spain. France and the UK will find themselves close to the global average, with advertising sales growing +5% to +6% next year.
Vincent Létang, EVP, Global Market Research at MAGNA and author of the report, said:
“Advertising spending slowed down in the second half of 2022 because of economic uncertainty and issues affecting digital advertising formats, but traditional editorial media managed to grow by +2.5%. The gap in growth rates with digital advertising growth was the narrowest ever measured by MAGNA, suggesting that the long-term transition to a digital-centric marketing landscape has slowed down following the COVID acceleration. Marketers continue to value the brand safety that editorial media vendors deliver, combined with expanding cross-platform opportunities. Television (+2%) and OOH media (+12%) were particularly resilient in 2022. The introduction of ad-supported premium streaming in 2023 and the continued success of digital audio formats also exemplify the comeback of ad-supported editorial media in the top of mind of marketers, consumers, and media executives.”
APAC AD FORECAST +6% IN 2023
APAC media owners advertising revenues grew by +5.2% in 2022 to reach $247bn. With Asian economies expected to re-accelerate and lead the global economy in 2023 (real GDP +4.9%) advertising revenues will accelerate by +6.1% in 2023, as China’s ad market re-accelerates from +3% to +7%. Digital advertising spending reached $169 billion in 2022 (68% of total ad spend). The fastest growth rates in APAC in 2022 came from India (+15%), Malaysia (+13%), and Taiwan, China (+12%), while ad markets barely grew in Hong Kong SAR, China (+2%), China’s mainland (+3%), and Vietnam (+4%). India is now consistently ahead of China as the fastest-growing emerging economy and fastest-growing large ad market in 2023, just as it’s about to surpasses China to become the world’s most populous country in 2023.
Leigh Terry, CEO Mediabrands APAC commented:
“The Asia Pacific advertising economy will grow by +5% this year, following the 2021 rebound (+18%). In 2023, the Asia Pacific ad market will expand by +6%, which is slightly higher than the global average of +5% and in line with the pre-COVID long-term regional growth. Growth is powered by large markets such as Australia (+8% in 2022, +5% expected in 2023) and India (+15% in 2022, +14% expected in 2023). In 2023, APAC advertising revenues will increase to $263 billion, 23% above the pre-COVID spending level, largely driven by digital advertising growth (+70%).”
Gurpreet Singh, Managing Director MAGNA APAC commented:
“After a double-digit growth in 2021 which was largely a bounce back from negative growth in 2020, advertising spends in Asia-Pacific continue to grow but at relatively lower growth rate. Growth in overall advertising spends is mainly driven by growth in digital spends, while spends on linear media overall are mostly showing decline in a majority of the APAC markets except for OOH which is getting back on growth track in most markets. Overall linear media spends are not yet able to come back to pre-covid levels in most of the APAC markets. South Asia is an exception where linear media is still showing good growth. Share of digital spend is already in a dominant position in more than half of the APAC markets, and within the next 5 years we expect this trend to expand across the vast majority of APAC markets.”
MEDIA TRENDS
TELEVISION RETAINS PRICING POWER
Television continues to suffer from the long-term erosion of linear reach and live viewing (time spent and ratings go down between -5% to -15% per year depending on targets and markets), and that is still not fully offset by rising audiences and ad sales on non-traditional platforms or formats. Cross-platform television ad revenues grew by +1.7% in 2022 to $172 billion, but they will decrease by -4% in 2023. To mitigate audience erosion and weaker demand from key industry verticals (CPG, Finance, Pharma), television companies can count on a few strengths and drivers: (1) strong growth for non-conventional ad sales (AVOD, linear addressable +10% to +20% in major markets), (2) resilient pricing (TV CPM inflation hit double-digits in 2021-22 and will continue to grow by an average 10% in 2023), (3) the rise of brand safety and media responsibility in marketers’ priorities, that leads some brands to slow down digital diversification, (4) the resilience of sports audiences, compared to other genres. Television is the medium that’s most affected by cyclical ad spend related to elections and global sports events: neutralizing cyclical dollars, global television ad revenues would have been slightly down (-1%) in 2022.
OOH COMPLETES FULL COVID RECOVERY
OOH media has been the success story of 2021 and 2022. At the end of 2022, OOH advertising has already recovered its pre-COVID size in several markets (US, Germany) and MAGNA believes it will complete a full global recovery in 2023 by growing by +6% to 33.5 billion (2019: $33.2 billion). The OOH medium benefits from the recovery of consumer mobility: leisure air travel recovered much faster than expected in 2022 (except in Asia), driving is back to, or above, pre-COVID levels; transit has recovered too but is still 10% to 20% below pre-COVID levels as a significant percentage of workers continue to work from home part of the week.
AUDIO FUELED BY NEW DIGITAL FORMATS
Audio advertising formats increased ad sales by +4% in 2022 to reach an estimated $29.9 billion, still shy if the pre-COVID total ($31.8bn). MAGNA anticipates flat ad sales in 2023 (+1%) as the continuing rise of digital audio ad formats (audio streaming and podcasting) barely offset a slowdown in broadcast radio revenues.
The growth in digital audio ad sales comes from digital pure players as well as radio broadcasters developing their on-demand and streaming offering and attracting more and more brands thanks to improved targeting opportunities.
PUBLISHING AD SALES SUFFER FROM PRIVACY LIMITATIONS
Publishing advertising sales shrank by -3% in 2022 to $47 billion. Both newspaper brands (-3%) and magazine brands (-4%) suffered as the growth in digital ad sales did not offset the long-term decline of print ad pages and revenues.
Publishers’ digital ad sales are hurt by the limitations in data collection and data-based targeting online and in the app environment. MAGNA predicts another decline of -3% for global publishing ad sales in 2023.
SEARCH: RECESSION-PROOF, PRIVACY-PROOF
Keyword-based search advertising formats (including product search by ecommerce platforms) remain the largest advertising format with consumer brands and small businesses spending $260bn in 2022 globally. While other digital ad formats slow down due to data restrictions, Search is driven by the continuing growth in ecommerce and was the fastest-growing ad format in 2022 (+13%).
Growth was fueled by volume rather than pricing: search queries increased by +3% and click-through-rates (% of search results leading to sponsored link clicks) increased by +9% probably because an increasing proportion of searches are product or shopping searches. The same organic growth factors will generate an additional 10% in global Search spend in 2023.
SOCIAL MEDIA STALLING UNDER A STORM OF HEADWINDS
Multiple headwinds (plateauing reach and usage, targeting limitations, and the rise of video snacking hurting both insertions and pricing) combined to cause social media advertising revenue to stall in 2022. Global ad sales grew by just +4% to $149 billion, a far cry from the growth rates of 20% to 35% observed in the previous three years. Tiktok is the only social media owner to post significant growth, while incumbent social networks suffer flat or declining ad sales, especially in Europe and North America. MAGNA anticipates social media advertising to re-accelerate only slightly in 2023 (+7%).
DIGITAL VIDEO: CONTINUED ROBUST GROWTH
Digital Video advertising will increase by +11% in 2022 to reach $65 billion. This represents the second fastest growth rate of all digital formats, slightly trailing search advertising. All components of the digital video landscape continue to grow, but short form user generated content (YouTube, Twitch, etc.) have seen slowing growth this year. CTV usage and streaming consumption continues to be a tailwind for long-form streaming growth, and 2022 has been no exception.
MEDIA OWNERS: DIGITAL CONCENTRATION PAUSES
The digital media giants saw slower growth in 2022 than they have in recent years. Based on financial publication in the first three quarters, MAGNA expects the top three (Google, Meta, Alibaba grew net advertising revenues by a combined +5% in 2022 (compared to +41% in 2021!), i.e. they underperform overall market growth (+6.6%) for the first time ever and their share of global ad sales paused at 42% after rising sharply and constantly in the last 15 years. Meanwhile, other top 15 media owners, Amazon, Bytedance, Microsoft and Apple continued to enjoy double-digit stronger growth in 2022.
CHINA
KEY FINDINGS
- Chinese media owners advertising revenues grew by +3% this year. This will bring the total ad market size to CNY 777 billion ($120 billion), as China remains the second largest market globally behind the United States.
- Digital ad formats saw an increase in spending by +7% to reach CNY 630 billion ($97.8 billion) in 2022. This represents a huge 81% of total advertising budgets.
- Linear advertising formats shrank by -10% this year, following 2021’s +5% rebound. As linear advertising formats lose some of the spending gained in 2021, linear advertising revenues remain 25% smaller than the pre-COVID total.
Chinese media owners advertising revenues grew by +3% this year, following 2021’s strong performance (+16%), to reach CNY 777 billion ($120 billion). In 2023, the total ad market will grow by +6% to CNY 829 billion ($128 billion), as China remains the second largest market globally behind the United States. But it is below global growth (+7%) for the second consecutive year.
Digital ad formats saw an increase in spending by +7% to reach CNY 630 billion ($97.8 billion) in 2022. This represents 81% of total advertising budgets, the second highest globally behind only the UK. Most of the growth is driven by advertising spending on social ad formats, which will increase by +11% to reach CNY 181 billion ($28.2 billion) and represents 29% of total digital ad spending. By format, Search is, by far, the largest segment, and represents 48% of total digital budgets in China. Search advertising spending will increase by +6% this year, driven by both core search engines and Ecommerce platforms. Furthermore, there is intense competition between different platforms, with the incumbent giants Baidu, Alibaba, and Tencent, increasingly competing with JD.com, Kuaishou, Pinduoduo, and Bytedance.
Linear advertising formats shrank by -10% this year, following 2021’s +5% growth. As linear advertising formats lose some of the spending gained in 2021, linear advertising revenues remain 25% smaller than the pre-COVID total. The television market shrank this year (-9%) compared to last year’s +3% growth, as it now represents 13% of total advertiser budgets. There was a boost in television spending from the Beijing Winter Olympics, which were held in February. In addition, the 2022 FIFA World cup will increase ad revenues within television formats. However, both highly anticipated events are not sufficient to offset viewing trend declines in 2022. Looking forward to 2023, there will be a further decrease in TV spending by -1%, as consumption trends once again result in headwinds for TV spending. Print formats continue to decline (-27%) and now represent less than 1% of total budgets. Like most markets, budgets in China are concentrating around TV and digital spending. Radio advertising is shrinking by -12% this year. Finally, while cinema grew by a tremendous +253% in 2021, it is declining by -43% and will increase in 2023 through 2025 before continuing its negative growth starting in 2026.
In 2023, the Chinese market grew by +7% to reach CNY 828 billion ($128 billion). Digital will drive the growth through the end of our forecast period. Digital growth will be led by video advertising (+10% to reach 18% of digital budgets) and search (+9% to reach 48% of total digital budgets). Social will grow by +8% in 2023 to reach 29% of total digital budgets. Static banners will stagnate (0%), following this year’s -6% decline and will continue to decline thereafter as they continue to lose share and favor with brands. On the other hand, linear advertising will continue on a declining trend through 2027. By 2027, linear advertising revenues will represent a small 12% of total brand budgets in China.
