Forecast: Global Ad Spend To Slow To 2.6% In 2023, Linear TV, Social Media To Falter, AVODs Outperform

Following an 8.3% or $67.3-billion rise this year, to $880.9 billion, global advertising spending will rise by just 2.6% in 2023, according to the 2022/2023 Ad Spend Outlook report from Worldwide Advertising Research Center (WARC). 

The forecast calls for an actual decline in spending for linear TV in 2023 and a $40-billion hit on social media over the two years, with a more upbeat outlook for video streaming.

The new projections, based on data from 100 ad markets worldwide, represent a downgrade of 4.3 percentage points to 2022 growth and 5.7 percentage points to 2023’s prospects, compared to WARC’s previous global forecast in December 2021 – a reduction of close to $90 billion in potential growth over the two years.

The $90-billion dip in growth potential reflects expectations of the growth rate of global output dropping by half and “acute supply-side pressures fanning inflation,” says James McDonald, director of data, intelligence and forecasting, WARC. “Yet brands are still spending as the COVID recovery continues, and global ad trade remains on course to top $1 trillion in value by 2025.”

Just four of the 18 product sectors that WARC monitors are expected to cut ad spend in 2023: automotive (-12.4%), financial services (-4.5%), alcoholic drinks (-1.1%) and transport & tourism (-0.4%).

However, the overall numbers are expected to take a significant hit due to a slowdown in social media ad spend driven by cutbacks in ad spending by the small and medium-size businesses that will be hardest hit by economic pressures, and collectively account for a significant share of overall social revenue.

WARC estimates that social media/online companies will take a collective hit of about $40 billion to their bottom lines over the two years as a result of the difficulty of ad targeting due to Apple’s consumer opt-in privacy measures.

Most are expected to see radically less growth compared to their historical performance. Social is expected to rise 11.5% in 2022 (compared to +47.1% in 2021) and just 5.2% in 2023 — its slowest-ever growth rate.

But platforms with rich sources of first-party data – most notably Amazon, Google and Apple – “are well-placed to weather future headwinds by offering measured performance in a climate where return on investment becomes paramount,” says McDonald.

Meanwhile, after growing 3.6%, to $180 billion, this year (20.4% of all global ad spend) as a result of U.S. elections and other cyclical events, linear TV is forecast to see a 4.5% loss next year, in the absence of those events. That would put TV ad revenue on a par with its 2021 value, $172 billion.

“Sky-high CPMs are potentially driving some advertisers to look to cheaper media,” and pay-TV providers are susceptible to churn if disposable incomes decrease further, the report notes.

In contrast, global ad spend in the total video streaming sector (including ad-supported video-on-demand/AVOD, broadcaster video-on-demand/BVOD and all over-the-top OTT) is projected to outperform the overall market, with 8.4% growth this year and 7% next year.

Within this, the AVOD sector – including major players such as Hulu, Roku and YouTube – is expected to rise 8% this year and 7.6% in 2023, to reach nearly $65 billion.

Broadcaster-owned streamers are projected to see 9.7% growth this year and 5.2% in 2023, but BVOD will reach only a relatively modest $18.5 billion.

Also, growing AVOD competition is expected to limit streaming operators’ overall growth going forward.  

For instance, YouTube’s advertising growth is projected at 7.3% in 2022, compared to 45.9% last year, and just 5.6% in 2023, and its share of the global AVOD market is projected at 39.4% in 2023 — partly due to the launch of AVOD tiers by Disney+ and Netflix and partly to the Apple privacy changes.

“There is already evidence of saturation in the streaming market, particularly in the U.S., with audiences now using seven streaming services on average (compared to the global average of five),” WARC points out. “Consequently, new entrants are just as likely to be fighting for existing advertising spend as they are for incremental dollars, which could hinder the overall growth of streaming operators in the short to medium term.”

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