Agencies To Wall Street: Short The Video Ad Marketplace

As part of a regular series of ad-executive fireside chats with Wall Street analysts at New Street Research, two influential agency media executives -- GroupM's Kate Scott-Dawkins and Horizon's Donnie Williams -- said the kind of short-form video advertising formats popularized by TikTok will continue to gain steam among advertisers.

New Street Analyst Dan Salmon characterized that trend as one of two key themes for the ad biz shared by the agency execs.

The other one: "macro uncertainty and potential recessionary headwinds."

Despite continuing uncertainty, GroupM's Scott-Dawkins said December ended 2022 better than many had expected in terms of ad spending, and some advertisers "will see budgets up in 2023, while others are down or flat."

"We think GroupM’s comments align with the green shoots of economic optimism that have buoyed the markets, the internet sector, and digital ad-driven internet stocks especially, to begin the year," New Street's Salmon noted in a report sent to investors this week.



Meanwhile, a short-form video advertising "battle" appears to be heating up, as Meta pushes its Reels format and YouTube its Shorts units to compete for market share with TikTok's rapidly growing short-form video dominance.

Horizon's Williams noted that while Reels is not yet on the same scale as TikTok, Meta's short-form video units appear to hold "the edge versus YouTube Shorts, as influencer/creator-based marketing has felt more natural to brands in the short-form video format on Instagram.

YouTube is more associated with wide distribution, versus a format-driven strategy."

"That said, traditional advertisers, such as those in the CPG category, do not consider short-form a TV-replacement," Salmon summed up, adding, "Instead, they continue to look to expand branding reach to young consumers who have left linear TV through methods such as music sponsorships."

If that short-form video ad war has broken out, it does not appear to have impacted TikTok's dominance yet, according to year-end-data released this week by Standard Media Index. While the data below represents gross ad dollars for all advertising formats, and is not discretely representative of short-form video, that is essentially the only format available on TikTok, which continued to expand its gross advertising revenues at high double-digit rates through year-end 2022.

Meta, by comparison, has been trending progressively downward.

This SMI data does not break out YouTube ad spending, but does show overall ad spending trending precipitously downward on Twitter and Snap, though Reddit has been surging.

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