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
1. The winter update of MAGNA’s “Global Ad Forecast” predicts that global media owners net advertising revenues (NAR) will reach $853 billion this year, +5.5% above the 2022 level, and will grow by +7.2% in 2024.
2. Advertising spending accelerated by +6.3% yoy in the second half of 2023 following a weaker first half (+4.7%) to average +5.5 growth full year.
3. Traditional mediaowners from the TV, Audio, Publishing and OOH industries, are typically vulnerable during this slow, uncertain macro-economic climate, causing 2023 TMO ad revenues to shrink by -4% to $266bn.
4. TV advertising revenues are shrinking by -6% this year to $158bn while Publishing ad sales drop -5%, Audio Media drops -2%, and Out-of-Home keeps growing +7% to reach $32bn (back to pre-COVID market size).
5. Digital Pure-Play media owners (DPP) ad revenue, on the other end, grew by +9.4% to $587bn (69% of total ad sales). DPP ad sales are driven by organic growth factors incl. the rise of ecommerce, retail media.
6. Keyword Search remains the most popular ad format, approaching the $300bn milestone this year (+9% to $298 billion). Social Media owners (e.g., Meta, Tiktok) re-accelerate (+15% to $182bn), while short-form pure-play video platforms (e.g., Youtube, Twitch) grow by +9% to $70bn.
7. The fastest-growing market this year is once again India (+12% to $14bn)while China recovers from zero COVID (+9.8%) while Northern European markets slow down: UK +3.9%, Germany +2.5%.
8. The Asia Pacific advertising economy grew by +8.2% this year, higher than the global average of +5.5. Growth this year is powered by India, Pakistan, and China, which will all grow by more than +10% in 2023.
9. Digital advertising revenues are the driver of growth in APAC. Search advertising revenues increased by +9.9% in 2023 and represented 48% of total digital advertising revenues.
10. MAGNA expects Automotive and Travel to be the most dynamic industry vertical next year. CPG/FMCG will benefit from lower inflation, retail media opportunities and sports events. On the other Entertainment marketing may suffer from the lower-than-usual volume of US shows and movies being released.
Vincent Létang, EVP, Global Market Research at MAGNA and author of the report, said:
“As expected by MAGNA back in June, advertising spending re-accelerated in the second half of 2023 after four slow quarters from mid-22 to mid-23. The recovery is caused by easier year-over-year comps, stabilizing economic conditions (inflation slowdown), and it mostly benefits pure-play digital advertising formats. Search formats are driven by CPG ecommerce and retail media; Social and Video formats recover to double-digit growth thanks a better monetization of the fast-growing short vertical video impressions. Meanwhile traditional media owners ad revenues – including their digital ad sales – are down by -4% this year (TV -6%). The cyclical events of 2024 (sports, elections) will make reach media and contextual advertising attractive again and stabilize TMO ad revenues: overall +2%, TV +3%.”
APAC AD FORECAST: +8.2% IN 2023
DIGITAL FORMATS DRIVE APAC IN 2023
The Asia Pacific advertising economy grew by +8.2% this year, higher than the global average of +5.5%. This is also up from the prior expectations for APAC in 2023 of +7.1%. Growth this year is powered by India, Pakistan, and China, which will all grow by more than +10% in 2023. In 2024, APAC advertising revenues will increase by +6% to $304 billion. This also represents a growth acceleration vs. prior APAC expectations of +5.2%.
This growth will consist of linear advertising revenues shrinking by -0.4% to reach $74 billion (26% of total APAC budgets) and digital advertising revenues growing by +11.6% to reach 74% of total budgets. The majority of that $74 billion of linear advertising revenues comes from television revenues (linear and digital) of $47 billion, shrinking by -1.9% y/y. Print and radio continue to decline (by -2.6% and -2.2% respectively). Radio will represent just 2% of budgets in 2023, and print will be just 3% of budgets. OOH remains the only linear advertising format that is seeing growth, up by +8% in 2023 to reach 4% of total budgets.
Television budgets will stabilize somewhat in 2024 due to the tailwinds of sporting events – primarily the Paris Olympics in 2024. Other significant global sporting events, such as the UEFA Euro 2024 tournament, will have a minor impact in APAC markets.Digital advertising revenues are the driver of growth. Search remains the largest portion of digital advertising revenues, representing $100 billion total. Search advertising revenues increased by +9.9% in 2023 and represented 48% of total digital advertising revenues. 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 growth has also rebounded, with both Google and Baidu performing better than they did in 2H22.
DIGITAL PURE PLAYERS TAKING SHARE Social media advertising revenues have also strengthened in 2023, growing by +16% to reach $68 billion (32% of total APAC advertising revenues). This is up from +12% in 2022. Both search and social media revenues are driven by mobile devices. Smartphones and 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 communications on smartphones, but also banking, insurance, and many work functions on their smartphones. As a result, 84% of total digital advertising revenues occur 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 74% of total advertising revenues in 2023. That’s higher than the 76% of total budgets that digital advertising will represent globally in 2028.Traditional media owners derive a significant portion of revenues from digital formats in APAC. In 2023, revenues from digital properties represented 15% of traditional media owner revenues in China, 10% in Japan, 26% in Australia, and 5% of traditional media owner revenues in India. While digital pure player revenues still make up a significant portion of total digital revenues and are the drivers of digital growth in APAC markets, traditional media owners are diversifying away from linear TV and physical print properties.
LONG-TERM: LINEAR FALLS BELOW 20%
By market, strong growth came from India (+12%), Pakistan (+11%), and China (+10%) in 2023. In 2024, India and China will remain robust, growing by similar amounts. Pakistan, on the other hand, will see a significant acceleration in growth, with 2024 ad revenues expected to increase by +21%. The slowest growth in APAC, on the other hand, will come from Thailand, Vietnam, and Singapore. No markets will shrink this year, however, as positive GDP expectations in the region and stable economies following the post-COVID rebound are all leading to at least mild growth in advertising revenues.
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.
Looking ahead to 2024, total advertising revenues will increase by +6.3% to reach $304 billion. This will be a combination of linear advertising revenues increasing by +0.4% to represent one quarter of total brand budgets, and digital advertising revenues growing by +8.4% and representing three quarters of total brand budgets.
Search and social media advertising will again be the primary drivers of this growth, as search (+7.7% in 2024) and social media (+10.2% in 2024) combine to represent 80% of total digital advertising dollars in the region. Strong growth will also come from digital video (+8.6%). Among traditional media formats, OOH will grow by +4% in 2024, and even television (-0.1%), print (-1.9%) and radio (-0.8%) will be flat rather than seeing significant erosion.
By 2028, the share of total revenues that are represented by linear advertising formats will have fallen below 20% for the first time. This compares to more than 40% of total revenues as recently as 2019.
Leigh Terry, CEO Mediabrands APAC commented:
“The Asia Pacific advertising economy grew by 8.2% this year, higher than the global average on 5.5%, and powered by growth markets like India (+12%) Pakistan (+11%) and China (10 %). APAC as a region is still dominated by China, which represents approximately half of total ad revenues. The country’s population, a massive 1.4 billion, makes it a key player in the global advertising market. GDP growth remains robust when viewed against other large and mature markets, however, consumer spending has remained resilient.”
The winter update of MAGNA’s “Global Ad Forecast” predicts media owners net advertising revenues (NAR) will reach $853 billion this year, growing +5.5% growth vs. 2022. 2023 ended up stronger than anticipated by MAGNA in its mid-year forecast update (June 2023: +4.6%) as second-half digital ad sales accelerated by +6.3% yoy following a weak first half (1Q23: +2%, 1H23: +4.7%) thanks to economic stabilization and easier comps.
Traditional media owners (TMO) historically focusing on Television, Audio, Publishing, OOH, and cinema media, are typically the most exposed in an uncertain macro-economic and business climate, as some brands seek to reduce marketing budgets or prioritize performance-based digital ad formats. Global TMO ad revenues shrank by an estimated -4.1% to $266bn globally. This rate of erosion is similar to what was observed in the ten years pre-COVID.
The non-linear ad sales of TMOs (AVOD, podcasting, DOOH etc.) continue to grow steadily. They increased by +7% this year to reach 20% of total TMO ad revenues on average (11% for TV and premium streaming video, 44% of newspaper and magazine publishers, 23% of radio broadcasters), but this is not yet enough to offset the continued erosion of traditional linear ad formats (-6.3%).The introduction of advertising on Amazon Prime Video will be a game changer for AVOD globally. Ads will first appear in January 2024 in the US, followed by Germany, Canada and the UK in the first half, and France, Italy, Spain, Mexico, and Australia later in the year. Amazon Prime will be bringing massive scale and reach from day one as viewers (111 million monthly users in the US alone) will be defaulted into the ad supported tier.Despite the growth of digital ad sales, total television advertising revenues have been shrinking by -6% this year to $158 billion while Publishing ad sales dropped -5% to $45bn and Audio Media NAR was down -2% to $29bn. The only traditional media types to keep growing in 2023 are Out-of-Home, up +7% to reach $32bn (now above its pre-COVID market size), cinema (+14% to $1.9bn but still 35% smaller than pre-COVID).Digital Pure-Play (DPP) ad formats (Search/Commerce, Social, Short-Form Video) grew by an estimated +9.4% to $587bn (69% of total ad sales). DPP ad sales are driven by several organic growth factors including the rise of ecommerce, retail media, digital media consumption, and stabilization in the data landscape after the restrictions suffered in 2021 and affecting the 2022 ad sales.Search/commerce formats remain the most popular, approaching the $300bn milestone (+9% to $298 billion). Social Media ad sales (e.g., Meta, Tiktok) re-accelerate strongly (+15% to $182bn) after stagnating for most of 2022, while short-form pure-play video platforms (e.g., Youtube, Twitch) grow by +9% to $70bn. Social and Pure-Play Video platforms both benefit from better monetization of the rapidly growing short vertical video formats.
Retail Media Networks generated $124 billion of ad revenues globally in 2023 ($43 billion in the US). This represents 15% of global advertising revenues. Most of it (87%) goes into keyword search-based formats, and Retail Media represents 23% of total search advertising revenues outside of China. MAGNA predicts global Retail Media Network (run by ecommerce platforms like Amazon or traditional retailers like Walmart) to grow ad revenues by +20% outside of China.
Looking at key markets, the strongest growth this year comes once again from India (+12% to $14bn), that becomes the 11th largest ad market globally. China (second-largest market) recovers faster than expected from the stagnation caused by zero-COVID in 2021-22 (+9.8%). At the other end, Northern European markets underperform due to sluggish economic activity: UK (#4) +3.9%, Germany (#5) +2.5% with TMO ad revenues down heavily in both markets. For once, Southern Europe shows more resilience this year France (#6, +5.7%), Italy (#12, +5.8%), and Spain (#14, +7.8%).
Automotive and Travel were, as expected the most dynamic industry verticals in 2023. In both cases a supply-driven business cycle trumps consumer anxiety, that would normally hurt big ticket items and discretionary services. Auto ad spend was up almost everywhere this year, except in the US, but MAGNA predicts the US will join the growth club in 2024 as the accelerating electrical transition spurs competition between old and new brands (and now Chinese brands in Europe) and electric cars are increasingly affordable in every market segment. CPG/FMCG brands will benefit from lower inflation, retail media opportunities, and the 2024 sports events (Food, Drinks).
Pharma marketing continues to grow organically driven by population ageing, competition, and innovation (major new drugs being launched for Cancer, COVID, Mental Health etc). Government/Political advertising will grow due to general elections taking in three major countries among the few where political campaigns are allowed on television: Mexico, India, and the US.
On the other end, Media & Entertainment marketing activity could benefit from the launch of yet another ad-supported tiers from a major streaming platform (Amazon Prime) but will suffer from the lower-than-usual volume of US shows and movies being released in 2024 due the Hollywood strikes in 2023 (the actors’ strike lasted from July to November). Betting brands would normally benefit from more sports events, but the regulatory pendulum has now switched back to tightening in Europe (Italy, Spain, Netherlands) and the Betting industry engages in voluntary moderation where it’s still allowed to advertise.
Media Vendor Concentration Grows Again. After stagnating for several quarters, the global advertising sales of Google, Meta and Alibaba re-accelerated since 2Q23 to reach a year-to-date 1Q-3Q growth of +4%, +13% and +5% respectively.These three media owners account for a combined 49% of global advertising revenues. Outside China, the top three vendors are Google, Meta, and Amazon, capturing 80% to 90% of digital ad spend and 56% of total ad spend (the market share being lower for national consumer brands higher for small, local, direct advertisers).Among the world’s top 20 vendors, Amazon, Bytedance and Apple posted the strongest growth over the first nine months (between 20% and 23% each), while the traditional media companies all reported heavy revenue declines: Comcast, Disney and Warner ad revenues shrank by -14% to -15% while Discovery and RTL Group lost -7% to -8%.
THE WORLD’S 2ND LARGEST AD MARKETChina, with a staggering GDP of $17.9 trillion in 2022, stands as the world’s second-largest economy. The country’s population, a massive 1.4 billion, makes it a key player in the global advertising market. In 2022, China’s advertising revenues reached an impressive CNY 930 billion ($138.2 billion). Digital advertising dominated the landscape, comprising 84% of total budgets in 2022, a significant leap from the 54% observed in 2015. In 2022, the telecom sector emerged as the leading industry, generating a colossal $22 billion, followed closely by technology at $21.4 billion and auto at $17.7 billion.The Chinese government will keep introducing policy measures in 2024 to boost consumption. This could include lowering interest rates on first home loans and offering additional housing credit subsidies. Furthermore, starting on January 1, 2024, additional tax deductions will be offered that should support consumer spending. In 2023, spending from food, beverage, pharma, personal care and household goods brands have seen increases in spending. In addition, media advertising revenues has been robust. Real estate is one of the weakest industries amid an economic crisis that centers around housing. Sporting events continue to be significant drivers of TV advertising revenues. In 2024, there is the Paris summer Olympics. It’s a popular television attraction.
2023: RESILIENT DESPITE BAD HEADLINESIn the latest (December 2023) update to the MAGNA Global Ad Forecast, China has moved to a cross-platform structure. This means that TV includes both linear and digital revenues of TV broadcasters. Print includes both linear and digital revenues of newspaper and magazine publishers. Radio includes both linear and streaming revenues from radio broadcasters.In 2023, China’s advertising revenues surged to CNY 1.0 trillion ($151.8 billion), marking an impressive growth of 9.8%. Ad revenues per capita in 2023 amounted to $108. Digital media owners commanded CNY 876.3 billion ($130.2 billion) in advertising revenues, experiencing a remarkable 12.1% growth. Digital advertising, claiming 86% of total budgets, saw substantial growth in search (10.6%), social media (16.1%), and digital video (12.7%) advertising.
Over the past two years, more than 130 Pay TV channels have been suspended, and more than 20 TV stations have been cancelled because of falling revenues. The staples of TV advertising continue to be FMCG industries like food & drink, alcoholic beverages, cosmetics, and personal care. Leading radio businesses have seen advertising cutbacks. The financial vertical, FMCG, and service industries continue to be the main stays of radio advertising. Some core verticals for radio, however, like food and health food, saw significant reductions in advertising revenues YTD in 2023. The cost of advertising in bus shelters, airports, and street locations was lower than it was last year. Weakness in OOH advertising revenues has come from auto brands and cell phone advertising brands. Film businesses in China have recovered more quickly than cinema advertising. Brands are still reluctant to go back to old spending habits even though zero-COVID policies have been dropped.
2024: DIGITAL STILL LEADSLooking ahead to 2024, China anticipates even greater heights, with advertising revenues projected to reach CNY 1.1 trillion ($161.7 billion), reflecting a 6.5% increase. This solidifies China’s position as the 2nd largest advertising market globally. Digital media owners are set to amass CNY 943.9 billion ($140.2 billion) in advertising revenues, demonstrating a robust growth of 7.7%. Digital advertising will constitute 87% of total budgets, witnessing growth in search (8.1%), social media (8.3%), and digital video (7.4%) advertising. Mobile advertising will further solidify its dominance, representing 90% of total digital budgets.Traditional media owners, however, are expected to face a marginal decline of 0.7%, primarily attributed to a slight reduction in television advertising revenues. Publishing and audio advertising are also poised to decrease, while out-of-home advertising is expected to grow by 2.4%.
Ad revenues per capita in 2024 are projected to be $115. Looking towards 2028, China’s advertising landscape is characterized by a steady annual growth of 4.4% in total advertising revenues. Digital media owners are set to thrive with a 5.4% annual growth, while traditional media owners will see a 2.9% decline annually. In 2028, digital media is projected to command an even larger share, constituting 90% of total budgets, compared to 86% in 2023. Television’s share is expected to decrease to 6% in 2028, down from 10% in 2023.
