US ad forecast for 2023 and 2024 increased, but strikes and slumping ratings cause TV challenges

Media investment firm Magna has upgraded its U.S. advertising market forecasts for 2023 and 2024, citing an improving economic outlook, better-than-expected year-to-date trends and upgrades to its digital media growth forecasts, partially offset by downward revisions advertising expectations for traditional media. media owners, including on television.

“Total ad spend accelerated again in the second quarter of 2023. Turnover increased by 4.4 percent
on an annual basis, after two quarters of stagnation,” the company said in a new report, citing “an overall improvement in the economy” and easier year-on-year comparisons. “However, only pure-play digital media providers (search, social, video) really benefited (+8.7 percent in the second quarter), while traditional media companies continued to struggle (-4.1 percent).” The company’s conclusion: “Digital spending is recovering, but traditional media continues to struggle.”

Total ad spend is now growing 7 to 8 percent in the current third and fourth quarters, compared to 2.9 percent in the first half of the year, bringing full-year 2023 ad growth to 5.2 percent, a up from Magna’s previous estimate of 4.2 percent, as revealed in June. That means advertising spend will reach $337 billion by 2023.

The company increased its 2023 revenue growth forecast for digital media owners, including Alphabet/Google, Meta/Facebook and Amazon, from 7.9 percent to 9.6 percent, but lowered the forecast for traditional media owners in TV, radio, publishing and out-of-the-art. home advertising from -3.2 percent to -3.6 percent.

Looking to 2024, Magna increased its ad spend growth forecast from 5.0 percent to 5.6 percent, or 8 percent including cyclical spend, such as political ads. “Digital media owners will grow ad sales by 9.8 percent next year, while cyclical spend will soften the erosion of non-cyclical ad sales for traditional media owners (-2.0 percent excluding cyclical, +4.3 percent including cyclical/political),” the company said. predicted in his report.

National TV networks in particular will face challenges on two fronts in 2024, both in terms of volumes and in terms of television
pricing of the offering,” Magna warned. It continues to forecast a 3.9 percent decline in national TV ad revenue in 2023, followed by a 3.2 percent decline in 2024, compared to its previous projection of a 2.2 percent decline.

“The ongoing writers’ strike could lead to a lack of new, compelling content in the first half of 2024 and thus potentially further accelerate the long-term ratings decline,” Magna’s new report said. “Additionally, the loss of ratings will not be offset by prices, as Magna forecasts low single-digit CPM (meaning: advertising rate) inflation for the first time in two decades. As a result, non-cyclical linear ad sales will contract by almost 7 percent next year, but that will be mitigated by continued growth in AVOD ad sales (+11 percent) and $800 million in additional revenue generated around the Paris Olympics .”

What does this achieve? “So total cross-platform national TV ad revenue will shrink by just 0.7 percent next year (compared to -3 percent excluding cyclicals), to $46.4 billion,” the ad forecaster report concluded.

“Six months ago, the media industry was preparing for a recession, but advertisers remained calm and continued to support their brands and sales through media investments,” said Vincent Létang, executive vp, global market intelligence at Magna and author of the report. “As the U.S. economy and ad spending have both been stronger than expected so far this year, and digital media is finally recovering from the woes of 2022, Magna is increasing its full-year ad revenue growth forecast .”

However, his report warned that “most traditional media owners’ advertising revenues will continue to stagnate or decline despite continued growth in their digital ad sales,” with non-cyclical ad sales reaching a full 3 percent for national television and local television will decline by 5 percent. Television next year. “However, spending around the upcoming presidential elections during the Summer Olympics will mitigate the erosion of national television revenues and provide tremendous growth for local television,” Magna stressed. “Local TV ad revenue is expected to grow +28% compared to 2023, thanks to an incremental $5.7 billion generated by political demand and induced spot inflation.”