Interpublic intelligence arm Magna reports that U.S. ad sales fell 7.2% in the first half of the year. In its latest ad forecast issued today the unit said that traditional media took a far larger hit — falling 23.1% while digital advertising increased 5.7%.
Improvement is expected in the second half as the economy reopens and ad sales are expected to be down just 2% versus the second half of 2019, to a large extent pumped up by political spending. That will lead to a full-year decline of 4.6% to $213 billion, according to the update.
Magna forecasts a rebound in advertising spending 2021 — +4.0% to $222 billion — driven by a recovery in consumption and mobility, and the return of normal event schedules (new shows, domestic sports, Olympics).
Seven of the top ten industry verticals are forecast to resuscitate ad budgets in 2021, but automotive and retail will continue to struggle. Categories expected to boost spend next year include entertainment (12%), restaurants (8%), as well as technology, personal care and pharmaceuticals (all at +5%).
But some industries will take years to fully recover from the pandemic and return to pre-COVID marketing spending levels, per the new forecast. Travel advertising spend is expected to decline by a further 15% in 2021 as Americans will remain hesitant about flying and traveling, while retail ad spend will fall 7% as the pandemic has hastened the brick-and-mortar long-term decline.
Finally, automotive ad spend may decrease by 5% as low consumer confidence and high unemployment will continue to hurt car sales.
All that said, next year’s US ad market will still be slightly smaller than it was in 2019 at nearly $224 billion. The ad market will benefit from economic stabilization and the Tokyo Olympic Games, which will generate approximately $800 million of incremental ad revenues.
This year record political ad spend ($5 billion, up 32% versus 2016) will mitigate local TV losses and pump close to a billion dollars into digital media for the first time (three times the amount of 2016).
Vincent Letang, executive vice president, global market intelligence, Magna, stated: “The sheer size of digital advertising in 2020 — approximately 55% of the US ad market — and its resilience in this economic environment explains the relatively modest decline Magna forecasts for the whole year despite the severity of the economic recession, compared to the double-digit decline in 2008-2009 when digital media was still nascent. For linear media, however, 2020 remains brutal, but Magna is confident that ad revenues will stabilize and recover in 2021”