Magna has slightly downgraded its 2023 U.S. advertising growth forecast to 3.4% for a total ad revenue market of $326 billion. The forecast unit, part of Interpublic Group, had previously estimated growth of 3.7% for this year.
The new estimate factors in cyclical events like the Olympics and elections. Excluding cyclical events, this year’s growth would be 5.2%.
And overall Magna’s chief forecaster Vincent Létang is optimistic about the full-year ad outlook particularly considering mixed economic signals. “In a similar economic climate ten or twenty years ago, the U.S. advertising market would almost certainly fall off a cliff,” said Létang. But this year the market is being supported by “media innovation fueling marketing demand,” such as big growth in the retail media and streaming services sectors.
Digital advertising channels are on track to grow 9% this year while linear advertising (more vulnerable in a shaky economy) will erode 4% this year, per the Magna analysis.
Search and product search will remain the largest ad formats for brands, growing by a combined 10% to $125 billion. National long-form video (linear and streaming) will be roughly flat this year versus 2022 as growth in OTT ad sales will offset declines in linear TV.
By category, Magna expects little to no growth across sectors including CPG, food/drinks and retail. The travel and movie categories will continue to recover after the pandemic.
But the biggest comeback among verticals is automotive, which was hit hard during the height of the pandemic. Car sales are expected to grow 10% this year leading to a 10% to 15% gain in advertising spending by dealers and brands.
“Brands and dealers can no longer assume consumers will be as loyal as they were pre-Covid,” Magna stated. The transition to electric vehicles will put pressure on all manufactures to increase ad/marketing efforts to both maintain share and grow.
Looking back at 2022, Magna reports that ad revenues grew by 6% (excluding cyclical spending). But spending slowed sharply in the second half of the year with flat results in the fourth quarter. That wasn’t totally unexpected, given the abnormally high post-covid growth spurt that occurred in 2021.