Media owners advertising revenues will grow above pre-COVID level in 2022, forecast
Globally, media owners’ advertising revenues will grow by over 9.2% this year to nearly $828 billion, that is 32% above the pre-COVID level of 2019 according to MAGNA’s “Global Ad Forecast”
MAGNA was always expecting the global advertising market to slow down significantly in 2022 following the unprecedented levels of growth observed in 2021 (Global +23%, U.S. +26%) caused by a once-in-a-lifetime “planetary alignment” of factors: the V-shaped economic recovery and the marketing consequences of post-COVID lifestyles. Still, in its December 2021 update, MAGNA was expecting +12% for global, all-media advertising revenues in 2022.
According to Magna, The reduction in forecast from +12% to +9% is due to two main headwinds: a global economic slowdown since 2Q (full-year real GDP growth +3.6% according to IMF compared to +4.9% six months ago), and the mounting restrictions to data-driven targeting affecting digital advertising sales (e.g. the impact Apple iOS changes have had on display and social ad formats).
Nevertheless +9% in 2022 would remain above pre-COVID growth rates (average 2015-2019: +7%). The economic slowdown will really start to affect ad markets in 2Q and 3Q and MAGNA anticipates lower growth over the period 2Q-4Q, as well as throughout 2023.
Nevertheless, the full-year 2022 forecast downgrade would have been much steeper if not for a stronger-than-expected first quarter recorded in most markets (+14% in the U.S.).
Growth expectations would also be lower if not for the strong cyclical factors of 2022: the U.S. mid-term election (bringing almost $7 billion to local TV stations and digital media), and two global sports events: the Beijing Winter Olympics and FIFA World Cup (Qatar, November). Without cyclical ad dollars, television revenue growth would be below +2% instead of growing by +4% this year.
Offsetting the effect of a weaker economic environment, organic drivers continue to fuel marketing activity and advertising spending. Among these: the competition between brands to gain leadership in new, fast-growing product verticals driven by lifestyle or regulatory changes (e.g. sports betting, food apps, direct-to-consumer disrupters), and the growing adoption of digital advertising by both local businesses and consumer brands, often at the expense of “below-the-line” marketing channels. Most industry verticals are expected to stabilize or increase ad spend this year.
Travel, Entertainment, Betting, and Technology are expected to grow the most, while Automotive and CPG/FMCG budgets may be under pressure due to supply chain and cost issues.
Around an average growth rate of +9%, MAGNA anticipates North America to grow the most (+11%) followed by LATAM (+10%), APAC (+8%) and EMEA (+7.5%).
The EMEA economy and ad markets will slow down more than other regions in 2022 because of the impact of the Ukraine war on trade and energy costs and energy supply (40% of natural gas consumed in Western Europe comes from Russia).
Additional headwinds include supply chain issues and the slowdown in Chinese imports, hurting manufacturing industries, typically in Germany, or the food and luxury industries in France or Italy. In April 2022, the IMF published real GDP forecasts between +2% and +3% for most of Europe (with Spain and UK slightly higher), i.e., 1 to 2% below the IMF forecasts in October 2021, and significantly below the global average (estimated at +3.6% at the time). Finally, most European economies and ad markets are mature, with all consumer brands and many SMBs already using the full palette of advertising formats, including digital formats and programmatic technologies.
Marketing activity and ad spending are therefore more vulnerable to economic slowdown than in emerging regions that are driven by organic growth in media usage and marketing usage. The U.S. ad market (40% of the global advertising revenues) will grow above average (+11% to $326 billion) as it is relatively insulated from the economic consequences of the Ukraine war and boosted by record political advertising.
The second largest ad market, China (15% of global advertising revenues) will grow below average (+8%) due to endemic headwinds: a stricter and less predictable regulatory environment for digital media giants, and severe COVID lockdowns under the “zero COVID” policy. Among other top 15 advertising markets the strongest growth forecast are India (+15%) and South Korea (+11%) while Germany and Sweden (both +6%), and Italy (+3%), will suffer the most in the post-Ukraine war economic environment.
Vincent Létang, EVP, Global Market Research, MAGNA and author of the report: “Most of the headwinds facing the advertising market this year were expected: economic landing following a red hot 2021, continued supply issues generating inflation, and mounting privacy restrictions slowing down the growth of digital ad formats. On top of that, the war In Ukraine now exacerbates inflation and economic uncertainty. Nevertheless, MAGNA believes full-year advertising revenues will grow again in 2022 at a healthy rate, helped by a strong start to the year, on top of organic and cyclical drivers.
Organic growth factors (continued and broad-based ecommerce spending, digital marketing adoption), strong cyclical drivers (record political spending in the U.S., Winter Olympics and FIFA World Cup), and the strength of emerging or recovering industry verticals (Travel, Entertainment, Betting, Technology) will generate enough marketing demand to offset headwinds and keep the advertising economy growing in full-year 2022.”
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