U.S. Consumer Spending On Video; Source: GroupM
Noting that U.S. advertising has had a “lousy six months,” GroupM’s just-released mid-year ad forecast has reduced the 2022 U.S. growth estimate to 5.7% (from 7.1%) and lowered the full-year 2023 outlook to 5.1% from the earlier estimate of 5.5%. The U.S. growth estimate for 2024 is 5%. (Figures exclude political).
The firm’s global outlook for 2023 remains constant at 5.9% ($874.5 billion), with some fluctuations by country in addition to the U.S., including China, now expected to grow 7.9% up from the previous estimate of 6.3%. And Italy, which had previously been forecast to shrink a bit, is now expected to grow by close to 2%. Globally the firm expects mid-single digit growth over the next five years.
“The economic mood around much of the world seems to be one of impending trouble,” the report, written by GroupM Business Intelligence President Kate Scott-Dawkins, states. “The worst of the pandemic is behind us but the behavior changes it wrought and the flows of capital it impacted are still working their ways through the global economy.” That would include the decline in government spending on public health messaging among other expenditures.
A deep recession of course would impact the current GroupM estimates. And some economic forecasters are still predicting a contraction in the U.S. economy sometime in the next year. But, “the start date for said contraction keeps getting pushed back,” per the GroupM report. ”While we are waiting for the other shoe to drop, U.S. consumers continue to work and buy groceries and take vacations, leading to a perennial state of wait and see.”
The report details a number of ongoing trends including the growth of retail media, which is expected to account for more than 15% of all media revenues by 2028. Retail media is the third-fastest growing advertising channel in 2023 behind digital OOH and CTV, although those channels are a fraction of the size. Retail media will grow 9.9% to reach $125.7 billion in 2023, and is forecast to exceed TV revenue (including CTV) in 2028.
The impact of artificial intelligence on advertising is growing by leaps and bounds. “By our estimate AI will touch more than half all of ad revenue in 2024 and will inform more than two-thirds of advertising by 2028,” the report states. And that’s just media revenue. AI is impacting other parts of the advertising ecosystem as well like production and workflows for data scientists, strategists and other employees.
AI and other factors will contribute to a deceleration in growth for search advertising over the next five years, per the report. Growth annually through 2028 will be about 5.7% versus 14% for the previous five years. In addition to uncertainty about how various AI applications will impact the medium, GroupM also points to a shift in searches carried out on retail, video and social platforms.
On the political ad front, GroupM notes that spending started earlier than expected this year and is expected to total $3 billion. Next year when the presidential race heats up, political expenditures are expected to top $15.1 billion.
Advertiser backing of user generated content is also growing significantly and accounted for a quarter of all spending on social media networks in 2022. The amount of UGC uploaded is staggering. The report notes that on YouTube alone some 500 hours of UGC content are uploaded every minute. That compares to Netflix which produces up to 1,000 hours of new content annually.
While it's hard to predict how much ad revenue will shift to UGC going forward, some brands are likely to stick with “professional” content due to “suitability” issues or a preference to align with the brand equity established by mainstream media owners.