Citing a "healthier-than-expected recovery" of the U.S. economy, coupled with "the significant impact of fiscal stimulus," GroupM updated its U.S. advertising outlook for 2021, calling for total ad spending to expand more than 9% over 2021, or nearly 15%, after factoring out the impact of 2020's political advertising boom.
"Embedded within our last forecast in December was an assumption around the successful distribution of COVID vaccines by mid-year 2021," GroupM Global Business Intelligence President Brian Wieser writes in the update, which was distributed over the weekend, adding: "However, the outcome of Georgia’s Senate races led to expectations for a massive stimulus package (which turned into the American Rescue Plan Act of 2021 passed into law this month) and this would have contributed to further expectations for growth. Of the $1.9 trillion estimated value of the Act, $1.1 trillion is set to be disbursed during 2021, according to the Congressional Budget Office. This equates to 5% of the US economy’s $21 trillion GDP. Even presuming that a significant share of this stimulus is saved or used to pay off debts, a meaningful amount of new money will make its way into the economy."
Wieser also projects relatively healthy long-term ad spending gains in the U.S. for the foreseeable future and points to some fundamental shifts in the source of advertising budgets, especially the long tail of small and emerging businesses.
"Small businesses are potentially a bigger factor, and they are growing in number if not in share of economic activity," Wieser explains, adding: "Another factor is the growing numbers of small businesses which have emerged during the recovery. Each of them is likely to spend some amount on advertising, even as all small businesses collectively lose share of economic activity relative to larger ones. Small business formation is well-illustrated by data tracked by the US Census Bureau, based upon applications for employer ID numbers from the IRS. On a year-over-year basis, we saw a decline in such applications during the spring in a manner that mirrored what we saw during the global financial crisis. But then as the summer progressed there was massive growth in these applications. Although this data does not capture the businesses which shut down during the pandemic (data from the Bureau of Labor Statistics on this metric is only available with a significant lag), the growth indicated here likely reflects a healthy market for start-ups. As new businesses are typically small businesses, and small businesses who advertise primarily have small ad budgets in absolute terms, Facebook and Google tend to be the primary beneficiaries within the advertising industry."
Based on GroupM's update, Madison Avenue's consensus outlook based on an average of four major agency holding companies' current forecasts, U.S. ad spending should expand more than 5% this year (see below).