MAGNA GLOBAL ADVERTISING FORECAST JUN 2024 UPDATE

MAGNA, the leading global media investment and intelligence company within IPG Mediabrands, has released the Global Advertising Forecast – Dec 2023 update, analyzing and predicting the size and growth of advertising revenues across 70 markets.

TEN TAKEAWAYS

The summer update of MAGNA’s “Global Ad Forecast” predicts that global media owners’ advertising revenues will reach $927 billion this year, growing by +10%.
MAGNA is raising its 2024 growth forecast following a stronger-than-expected ad market in the first quarter (+12%) and an improvement in the economic outlook (real GDP growth +3.2%, APAC +5.2%).
The advertising revenues of traditional media owners (TMO) – from the television, radio, publishing, and out-of-home media industries – are expected to grow to $272 billion, a +3% increase that represents a noticeable improvement compared to 2023 (-4%).
TMO ad sales are driven by a record number of cyclical events and a +11% growth in TMO’s non-linear ad sales (e.g. ad-supported streaming +18%) that are now accounting for one quarter of total TMO ad revenues.
The advertising sales of Digital Pure Players (DPP) will increase by +13% to reach $655 billion.
DPP ad sales are boosted by increased competition in ecommerce, the rise of retail media networks ($146 billion this year), and better monetization of short vertical videos in video apps and social media apps.
Keyword Search remains the largest digital ad format, growing by +12% to reach $330 billion this year. Social Media owners (e.g., Meta, TikTok) accelerate (+18% to $212bn), while short-form pure-play video platforms (e.g., YouTube, Twitch) grow by +14% to reach $78 billion.
Among the most dynamic ad markets this year: Spain (+14%), India and the UK (both +12%), France and the US (both +11%). Germany and China are both experiencing economic difficulties and slower-than-average advertising spending (both +8%).
The APAC ad market will grow by +8.5% this year to $289 billion. Traditional Media Owners ad sales will grow by +0.8% to $68 billion while DPP ad revenues will expand by +11.1% to $220 billion.
Automotive and CPG/FMCG brands will be among the fastest-growing ad spending verticals this year, while Finance re-accelerates and Government expands due to the many elections taking place this year.

Vincent Létang, EVP, Global Market Research at MAGNA, and author of the report,said:

“Based on MAGNA’s analysis of media companies financial, advertising revenues were much stronger than expected in the first quarter of 2024. Coupled with some improvement in the macro-economic outlook, this leads us to increase our full-year global advertising growth forecast from +7.2% (December 2023 update) to +10%. All categories of media owners are faring better than expected so far this year, including traditional media owners and, specifically, television and premium long-form video. The introduction and rapid development of ad-supported streaming in more markets by nearly all streaming players (now including Prime Video) is driving non-linear TV ad sales by +16% this year, and total TV ad sales by +4%. Non-linear forms of television are finally reaching scale in terms of viewing and advertising monetization.”

The summer update of MAGNA’s “Global Ad Forecast” predicts media owners net advertising revenues (NAR) will reach $927 billion this year, growing +10.0% over 2023. This is a significant acceleration on the global growth recorded in 2023 (+6.4%). Neutralizing the impact of cyclical events in 2023 and 2024, the normalized acceleration is still real but more modest: non-cyclical ad revenues grew by +7.5% in 2023 and will grow by +8.7% in 2024.

A record number of cyclical events are taking place in 2024, including four major sports tournaments (Paris Olympics, UEFA Euro 2024, Copa América hosted by the US, and the ICC T20 Cricket World Cup hosted by the US and the West Indies), and general elections in five major markets (Mexico, India, US, France, and the UK). The first three elections take place in countries with little or no restrictions to political advertising, therefore moving the needle in terms of advertising sales. Overall, the 2024 cyclical events will provide 1.3% extra growth to global ad revenues this year, 5% extra growth for television, 0.5% extra growth for digital media, and almost 2% extra growth for the US market alone.

MEDIA

TMO DIGITAL SALES GROW DOUBLE-DIGITS

MAGNA was always expecting a strong ad market in the first quarter of 2024, due to a comp effect (1Q23 was extremely weak). Based on our analysis of media companies’ first-quarter financial reports, 1Q24 was an even stronger than expected. Year-over-Year growth average +12% in key markets, +17% in Spain, +15% in France, and Germany. Quarterly growth rates will gradually slow as comps become tougher in the second half, but this strong start of the year, coupled with a stronger economic outlook led us to raise the full year 2024 forecast for almost every individual market we monitor, bringing the expected global growth from +6.4% in December, to +10% now. The full-year ad revenues of traditional media owners are now forecast to grow by +3% instead of +2%, and the ad sales of digital pure players are now expected to grow by +13% (previously +9.4%).

Traditional media owners (TMO) historically focusing on Television, Audio, Publishing, OOH, and cinema media, will grow ad revenues by +3% globally in 2024, to reach $272 billion.

TMO’s non-linear ad sales (e.g., ad-supported streaming, digital audio, publishers’ digital ad sales) are now accounting for +25% of total TMO ad revenues and supporting advertising growth while traditional linear ad sales are stagnating. Ad-supported streaming is taking off in 2024, as traditional TV players (e.g. Disney+, Max, ITV Hub, Joyn, TF1+, etc.) and pure streaming players (Netflix, Amazon) will generate at least $18 billion this year (+16%). Amazon has already introduced an ad-supported tier on Prime Video in most large markets in the first half of 2024, including the US, Canada, Mexico, France, Germany, Italy, Spain, and the UK. Everywhere users are defaulted to the new ad-supported tier, and MAGNA believes most users will permanently remain on that tier, rather than upgrade to a more expensive ad-free tier. Other streaming platforms are introducing such ad tiers in more markets (e.g., Max in Latin America in Feb. 2024) while the rising cost of ad-free options makes the ad-supported tiers increasingly attractive.

Cross-platform television remains the largest traditional media with total ad sales reaching $162 billion this year (+4%) as media owners benefit from cyclical events and rapid growth of ad-supported streaming. Publishing ad sales will remain subdued (-3% to $44 billion) while Radio ad sales reach $29 billion (+2%).

After finally catching up with the pre-COVID levels in 2023, OOH media continues to show significant organic growth (+7% to $35 billion) driven by additional screen units generating digital OOH growth (+12%, reaching almost 40% of global OOH ad sales), and by omnichannel programmatic spending.

Digital Pure-Play (DPP) media owners, offering Search/Commerce, Social, Short-Form Video, Static Banners, and Digital Audio ad formats, will reach $655 billion this year, growing by +13% over 2023, and accounting for 71% of total ad sales. DPP ad sales are fueled by multiple organic growth factors including the rise of ecommerce, the rise of retail media networks providing much needed consumer data to the programmatic ecosystem, growing digital penetration in emerging markets, and better monetization of the rapidly growing short vertical video formats in social and video apps.

Keyword Search will remain the largest digital advertising format, reaching the $330 billion milestone driven by Retailer Search (e.g., Amazon and product listing ad retail media, +14% to $126 billion) and Core Search (e.g., Google, Bing, Baidu, +11% to $204 billion). Social Media ad sales (e.g., Meta, TikTok) will grow by 17.5% to $212 billion), while Short-Form Pure-Play Video platforms (e.g., YouTube, Twitch) will expand ad revenues by +14% to $78 billion.

MARKETS

INDIA AND SPAIN AMONG THE MOST DYNAMIC

The economic outlook is the primary factor behind advertising spending decisions, and economic activity is so far stronger than previously expected this year. In its April report, the IMF raised its 2024 GDP growth forecast for the world (from +2.9% to +3.2%), for the US (from +1.5% to +2.7%), for China, India, and Brazil. The forecast was lowered, however, for France and Germany, but as it happens these two markets will benefit from hosting major sports events to support marketing and advertising activity. Meanwhile inflation is slowing down everywhere and expected to hover between +2% and +3% in most large markets, which is still above the long-term target of monetary institutions but low enough to no longer hurt the sales and marketing efforts of CPG/FMCG brands.

Among the most dynamic ad markets this year: Spain (+14%), India and the UK (both +12%), France and the US (both +11%). Germany and China are both experience economic difficulties and slower-than-average advertising spending (both +8%).

In the US, media owners ad revenue will increase by +10.7% to $374 billion. The US remains the largest and most intense ad market in the world with advertisers spending $1,100 per consumer in 2024; it’s 8 times more than the global average ($160), ten times more than China ($110) and a hundred times more than India ($10).

ADVERTISERS

AUTO AND CPG BRANDS OUTPERFORM

Automotive, Food, and Drinks will be among the fastest-growing industry verticals in 2024. Finance/Insurance re-accelerates. Government ad spending explodes due to the many elections taking place this year (India, Mexico, UK, and the US elections expected to generate more than $9 billion of extra ad sales this year).

Automotive brands were very dynamic in 2023 due to the increased levels of competition brought about by the electric transition, and the return of normal supply following the supply chain issues of 2021-2022 that inhibited car sales. After the 2023 rebound, car sales are slowing down in 2024 (Jan-May was still +7% in Europe, but only +2% in the US) but a continued push towards more EV releases, heightened competition (between traditional brands, EV pure players, and now Chinese newcomer brands), and major sports events will fuel above-average marketing and advertising activity this year.

Food and Drink brands were the main victims of the high levels of inflation in 2022 and 2023, as marketers were forced to increase retail prices to meet rising cost, making them increasingly vulnerable to consumer downtrading and retailer brands. Food, Drinks and other CPG/FMCG categories chose to concentrate on retail media at the expense of traditional media during that period. Now that inflation in commodity costs and consumer prices is under control, marketers are comfortable returning to normal levels of brand advertising budgets and taking advantage of the marketing opportunities offered by major sports events, while still developing retail media by re-allocating in-store marketing budgets to support ecommerce.

Among industry verticals expected to be dynamic, Finance/Insurance is strong as the industry is finally recovering from several headwinds in recent years: COVID, the Crypto rise and burst (and now rising again), and high interest rates that hurt segments like mortgages, loans, and credit cards.

The Retail industry will show moderate advertising activity overall, as an average between traditional brick-and-mortar brands slowing down from mature levels of marketing spending, and new ecommerce brands like Temu and Shein developing their share of voice aggressively.

MAGNA is expecting below-average advertising growth from several large verticals. Technology and Telecoms will continue to show subdued marketing and advertising activity as tech innovation slows down and tech brands focus on profitability rather than growth. Media/Entertainment brands also focus on the bottom line and have fewer-than-usual new movies and shows to advertise in 2024 due to the 6 months hiatus in Hollywood production in 2023. Finally, after a spectacular post-COVID rebound in 2021-2023, the Travel industry is slowing down this year, and so will the pace advertising spending. Some segments are still growing however, including business travel and cruise ships, with additional capacities to fill in 2024.

MEDIA OWNERS

DIGITAL CONCENTRATION GROWS AGAIN

The MAGNA report also provides estimates on media owners ad revenues, based on media companies’ financial reports. It reveals that global media vendor concentration grew again in 2023. After stagnating in 2022 and the first half of 2023, the global advertising sales of digital media giants re-accelerated in the second half of 2023. The main factor behind the revenue slowdown between mid-2022 and mid-2023 was the rapid rise of short vertical videos in social and video apps, and the weaker advertising monetization that initially ensued for vendors like Meta and YouTube. Monetization finally improved from 3Q23, and quarterly growth rates have been strong for all major vendors ever since.

Full-year 2023, Google, Meta, and Amazon organic ad revenues increased by +6%, +16% and +24% respectively. The big three now attract a combined 60% of total advertising revenues outside China ($417 billion out of $698 billion), up from 57% in 2021-2022. Including China – where they don’t operate – they control 49% of global ad sales.

Among the world’s top 20 vendors, Amazon (+24%), Bytedance/TikTok (+18%) and Apple (+23%) posted the strongest growth in advertising revenues in 2023 while most traditional media companies reported declines in global ad sales: Comcast (-16%), Disney (-9%), Warner (-12%) and RTL (-4%). JCDecaux was the only top traditional media owner to grow ad sales in 2023 (+3%).

In the first quarter of 2024, the leading global digital vendors reported the strongest growth rates in more than two years. Based on MAGNA’s analysis of financial report, global Search ad sales grew by +16% year-over-year, pure-play video by +21% and Social Media by +28% year-over-year. Quarterly growth rates are bound to slow down as comps will gradually get tougher, but MAGNA anticipates double-digit growth for all key digital formats and vendors this year.

APAC

DIGITAL REVENUES ARE THE DRIVER OF GROWTH

The advertising economy in Asia Pacific will grow by +8.5% in 2024 to reach $289 billion. This follows 2023 growth of +9.5% to reach $266 billion. This is taking place in a slightly slowing, but stable, economic environment where real GDP is expected to grow by +5.2% in 2024 according to the IMF. Inflation in APAC has continued to decline and while some economies are still seeing sustained price pressures, others are facing deflationary risks. Global disinflation and the prospect of monetary easing have increased the likelihood of a soft landing.

Overall APAC growth of +8.5% in 2024 consists of traditional media owners seeing +0.8% growth to reach $68 billion (24% of budgets), and digital pure player publishers seeing growth of +11.1% to reach $220 billion (76% of budgets). Television budgets are stabilizing in 2024 and are expected to be up by +0.2% following 2023’s -2.3% performance. This increase in growth is primarily driven by the tailwinds of sporting events – primarily the Paris Olympics. The UEFA Euro 2024 tournament and other sporting events typically have only a minor impact in APAC markets.

Digital advertising revenues are the driver of growth. Search remains the largest portion of digital advertising revenues and will represent $103 billion in 2024. This is 47% of total digital advertising budgets. Search advertising in APAC is substantially driven by retail media platforms, especially in China where Alibaba, JD.com, Pinduoduo, and Meituan all drive search advertising revenues. Core search is also spiking around the world as traditional search platforms like Google and Baidu also see strong performance relative to recent results.

Social media advertising revenues also remain strong in 2024. While social media was already surging ahead in 2023 in APAC (+19% growth to reach $65 billion), growth will again be robust in 2024 (+15% to reach $74 billion). This means social media budgets will represent 34% of total digital advertising budgets. Both search and social media revenues are driven by mobile devices. Smartphones are not just the dominant way that most consumers access the internet; in many APAC markets they are the only way consumers access the internet. Many consumers skipped the desktop hardware generation and conduct their digital lives solely on their smartphones. Furthermore, in China consumers don’t just do shopping and communication on smartphones, but also banking, insurance, and many work functions. Because of this, 76% of total digital advertising revenues in APAC are on mobile devices.

The digital strength driving APAC advertising revenues will translate to continued share gains for digital advertising revenues in APAC. Digital revenues will represent 81% of total budgets in 2028, up from 76% of total advertising revenues in 2024.

In 2024, the strongest growth in APAC is expected to come from Sri Lanka (+12%), India (+11.8%), and Japan (+11.8%). This represents a significant jump in growth for Japan, following 2023’s +5.6% growth rate. Growth in many traditionally mature markets is rebounding in 2024. APAC as a region is still dominated by China, which represents approximately half of total ad revenues. When combined with Japan, Australia, India, and South Korea, those five large markets represent 87% of total APAC revenues.

By 2028, the share of total revenues that are represented by linear advertising formats will have fallen to just 19%, representing about the same number of dollars ($65 billion) as they do today ($68 billion). Digital pure players, on the other hand, will represent 81% of total budgets and $286 billion, significantly higher than their 2024 total ($220 billion). The largest absolute increases in advertising revenues will come from search advertising (+$28 billion) and social media (+$27 billion) by 2028 compared to this year in 2024.

Leigh Terry, CEO IPG Mediabrands APAC, commented:

“The advertising industry in APAC is poised for continued growth in 2024, with an 8.5% projected increase, reaching $289 billion. This follows a 9.5% growth in 2023. Despite economic fluctuations, digital advertising remains the driving force, with search and social media leading the way. The digital dominance in APAC is expected to persist, with digital revenues forecast to account for 81% of total budgets by 2028, up from 76% in 2024. This shift underscores the growing importance of digital channels in reaching and engaging consumers in the region. Sri Lanka, India, and Japan are poised for significant growth in 2024, with mature markets in the region also showing signs of recovery, and contributing to the overall positive outlook for APAC.”

CHINA

THE WORLD’S 2ND LARGEST AD MARKET

While China’s economic growth has continued to slow, advertising revenues remain strong. This is particularly true by digital formats and DOOH advertising. While concerns around AI applications, increasing demands for user privacy protection, and the growing need for product synergy among advertisers is top of mind, digital budgets continue to increase. As a result, while digital advertising growth may slow, it will still lead the Chinese market forward. Furthermore, traditional internet platforms like Baidu and Weibo continue to lose share, while commerce platforms dominate. In addition, new platforms continue to emerge as contenders, such as Xiaohongshu (community commerce) and Bilibili (video sharing) are improving their commercialization.

China boasted a GDP of $17.3 trillion in 2023, securing its position as the world’s second-largest economy. With a population of 1.41 billion in the same year, China exhibited substantial economic prowess. In 2023, the nation’s advertising revenues reached a staggering CNY 1.0 trillion ($144.7 billion).

Digital media dominated the advertising landscape, constituting 86% of total budgets in 2023, compared to 54% in 2015. Television advertising accounted for 10% of budgets in 2023, down from 32% in 2015, while print and radio each represented a minimal fraction, and out-of-home advertising comprised 3% of budgets.

Telecoms emerged as the leading industry vertical, generating $22 billion in revenue, followed closely by Technology at $21.4 billion, and Auto at $17.7 billion.

In China in 2023, 5% of TV broadcaster revenues come from digital formats. In addition, 15% of revenues overall for traditional media owners come from digital formats. Growth of digital formats for traditional media owners will be +11% in 2024.

China experienced remarkable growth in advertising revenues in 2023, reaching CNY 1.0 trillion ($144.7 billion), marking a substantial increase of 12.4% compared to the previous year. This surge solidified China’s position as the second-largest advertising market globally.

Digital advertising revenues are now growing under the ‘Internet Advertising Management Measures,’ which went into force in May 2023. This requires internet ads to be accurate, legal, and meet the standards of socialist spiritual civilization creation. It prohibits the publication of tobacco ads and prescription medication ads online, and places tight limitations on pop-up commercials. There are also more regulations around internet live broadcasts, to try to get a handle on fast-growing formats. In this environment, digital media owners saw robust growth, with advertising revenues soaring to CNY 895.4 billion ($124 billion), a remarkable increase of 14.6% year-on-year. Search advertising surged by 12.3% to CNY 442.7 billion ($61.3 billion), while social media and digital video advertising witnessed growth rates of 21.4% and 13.6% respectively. Mobile advertising accounted for a substantial 89% of total digital advertising revenues.

China will see a year of sports in 2024, which will provide a slight boost to underlying advertising trends. This will be especially true for casual wear, healthy food, and drink brands, as well as tourism brands. The Olympics is one important sporting event, as is the F1 Grand Prix which returned to China after a 5-year absence, sparking widespread conversation and interest on social media.

China anticipates continued growth in advertising revenues, reaching CNY 1.1261 trillion ($156 billion) in 2024, reflecting a solid increase of 7.7%. This growth trajectory is expected to maintain China’s status as the second-largest advertising market worldwide.

Digital media owners are projected to see revenues climb to CNY 976.3 billion ($135.2 billion), marking a growth rate of 9%. Search and social media advertising are expected to grow by 8.1% and 11.9% respectively, while digital video advertising is forecasted to increase by 8.6%. Mobile advertising is poised to dominate, comprising 91% of total digital advertising revenues.

Looking ahead to 2028, China anticipates annual growth in total advertising revenues of 4.8%, with digital media owners seeing a robust annual growth rate of 5.8%, while traditional media owners may experience a slight decline of 2.5% annually. By 2028, China is projected to maintain its position as the second-largest advertising market globally.