Other Agencies: We're Not Seeing The Growth The Big 4 Are Forecasting

Top executives of big holding company and independent media services agencies that do not officially release advertising forecast estimates last week told MediaPost they believe the ones that do publish them do not represent what they have been experiencing in terms of U.S. ad spending trends.

Specifically, they said their own internal estimates are closer to ones published by MediaPost last week, based on analysis of data from Standard Media Index indicating the U.S. ad economy expanded only about 3% in 2022, which compares with a consensus of nearly 10% from the Big 4 agency holding company’s more estimates.



The Big 4’s forecasts – which range from a 2022 growth rate of 7.1% from GroupM’s business intelligence team to Dentsu’s 13.2% are considerable more bullish than what the executives of other major U.S. agencies say they are seeing.

“The truth is somewhere closer to what SMI is seeing,” said an executive from an agency holding company that contributes data on invoiced media buys to SMI’s “pool,” but does not publish a public forecast.

“I would agree with that,” concurred an executive at a large independent media agency also known to be part of SMI’s pool.

“I checked in with our Investment team and they confirmed that for us, we see our growth this year due to new business, but we’re not seeing/projecting a lot of organic growth,” added a different executive from another agency holding company that does not publicly publish forecasts. “Based on this, I’d say we probably fall more in line with what you’re seeing based on SMI data, as we’re not seeing double digit growth.”

The disparities are not necessarily a reflection of the relative accuracy of the Big 4’s forecasts so much as it is that they likely are looking at different things than what goes into the SMI database, which is based on actual media buys made by the nation’s biggest agencies.

For one thing, the Big 4 forecasts are accounting for much more of the ad spending activity coming from the long tail of small- and medium-size businesses that make up a significant amount of the growth of U.S. and global ad spending, especially among big digital platforms that have developed self-serve ad buying interfaces enabling small advertisers to buy directly and cost-effectively from them.

And most of the ad industry agrees that is where much of its growth has been coming from.

“Digital advertising will end up in the fourth quarter [of 2022], probably at a pretty high single-digit growth rate, because we’re still going to see a lot of growth from retail media when we see Amazon’s numbers,” former GroupM Global President of Business Intelligence Brian Wieser said in what may or may not be his final episode of the agency’s “This Week Next Week” podcast on Friday.

Wieser said that despite some flattening of Meta’s digital ad spending growth, it would likely be offset by TikTok’s, which “ is probably growing a pace that more than outpaces whatever their decline is in absolute terms.”

Wieser’s observation illustrates why other big agencies are not seeing the internal growth that are reflected in forecasts and periodic tracking from peers like GroupM, which are tracking ad revenue reported by publicly traded media companies, whose revenues come from sources beyond the big holding companies and independent agencies.

Another reason for the disparity is that the biggest agencies still are more reliant on legacy media than likely are reflected in the Big 4’s forecasts.

According to SMI’s most recent data, reflecting December 2022, 64% of ad spending from its pool agencies was spent on digital media, with more than a third still being spent on non-digital media like linear television, which has not been growing as fast.

And while the agency executives said they are not seeing troubling signs such as advertisers exercising their quarterly cancellation options for their 2022-23 upfront advertising buys, they say they are beginning to see more examples of last-minute “fire sales” — or cheap opportunistic — buys for premium network TV inventory that they have not seen in some time.

One agency executive also noted that while his clients are not exercising network TV cancellation options, it’s because they already adjusted for an economic downturn last summer by reducing the amount they originally pledged to buy as part of their 2022-23 upfront advertising deals before they went from “hold” to firm orders.

“The bottom line is that the forecasts coming from some agencies feel much rosier than what we are experiencing,” said on of the agency executives.

And while macroeconomic indicators are not terrible in terms of important factors like employment and wage growth, concerns about inflation and a potential recession remain, which could be a drag on some advertisers' spending plans for 2023.

Currently, the Big 4 ad forecast consensus for 2023 calls for the U.S. ad economy to expand 4.4%, with Dentsu and IPG Mediabrand's Magna on the low end at +3.7% and GroupM on the high end at +5.5%.

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