Despite rising inflation and economic uncertainty, U.S. ad sales are projected to fly past $300 billion for the first time ever, according to Magna’s latest advertising forecast.
Based on financial reports, Magna states that U.S. media owner advertising revenues grew 11% year-over-year to $151 billion in the first half of 2022. And though a weaker economic outlook will cause advertisers to reduce spending in the second half, stronger-than-expected political advertising will lessen the impact on the media industry. Ad sales grew by 14% year-over-year in the first quarter, and by 7% in the second quarter.
For the full year, revenues will reach $323 billion, according to Magna. The total is 9.8% above 2021 levels, 8.1% of which is non-cyclical and non-political ad spending.
Out-of-home advertising was the fastest growing ad format, with 30% growth year-over-year, largely driven by the ongoing recovery since the Covid-19 pandemic led to a steep decline in 2020. Cinema advertising also recovered, growing 430% in the first half, as audiences returned to theaters in full force.
Keyword formats, including search and retail media, had 19% growth, while AVOD and CTV also experienced strong ad increases with 18% growth. Digital video, including YouTube and Twitch, grew 14%.
Social media ad sales experienced a significant slowdown in 2022, with only 3% growth to $30 billion in the first half, apparently suffering from reduced access to user data in the iOS environment, Magna reports. The format grew 38% in 2021.
Traditional linear TV sales also slowed down, with national TV sales increasing only 2% to $20 billion, which came in part because of ad sales for the Winter Olympics in Beijing. Local TV sales rose 10% to $9 billion in the first half, thanks to a bump from political spending.
On a full-year basis, cross-platform video will grow by 8% (linear television down 3%, local TV up 22%, AVOD up 22%). Cross-platform audio (radio, audio streaming) will increase by 7%, out-of-home by 22% and cinema by 138%. For direct media formats, search will grow by 17%, direct mail will grow 8% and social media will increase 4%.
Growth despite uncertainty
“Following a strong first half, non-cyclical advertising spending is slowing down as several industries are facing an uncertain economic environment. There are several growth factors that will help stabilize media owner ad revenues in coming months,” Vincent Létang, evp global market intelligence at Magna and author of the report, said in a statement.
Létang noted that organic growth factors include retail media networks bringing below-the-line marketing budgets into digital media, programmatic spending in digital audio and digital out-of-home formats and the expansion of AVOD and CTV advertising with new ad-supported tiers from Disney+ and Netflix.
Several categories may moderate spending in the second half, including CPG, restaurants and retail, so Magna is predicting a slowdown of 6.6%. However, cyclical ad spending on mid-term elections and the upcoming World Cup will offset the dip.
Political ad spending is expected to grow 63% when compared to the 2018 mid-term, generating $7.3 billion in revenue for media owners, with 70% of it concentrated in the second half. Local television will bring in two-thirds of the revenue, accounting for 25% of local TV advertising for the year. Digital media formats will also take in $1.3 billion from political campaigns, with sales up 150% to +200% for search, digital video and social formats.
Looking ahead
For 2023, Magna has reduced its advertising forecast from 5.8% growth to 4.8%, based on a weakened economic outlook and lack of cyclical events.
CPG, finance and retail are expected to have below-average growth. However, entertainment spending, including movies and streaming, will grow amid reignited competition in the AVOD and SVOD space. Additional growth will come in travel and betting, with the possibility of automotive growth if that industry continues to stabilize.
Retail media advertising will increase from $31 billion this year to $42 billion in 2023, with the majority of that coming from Amazon’s product search, according to Magna. Keyword search formats will continue to outperform with a 13% increase. Out-of-home advertising will rise 8%.
Disney+’s and Netflix’s upcoming ad tiers are expected to help grow spending rather than cannibalize existing budgets. As a result, the long-form AVOD/CTV segment will accelerate from 22% growth in 2022 to 33% growth in 2023, reaching $6.3 billion in total advertising sales.
