Baird Revises 2023 Online Ad Forecast To $237B

Baird Equity Research updated its multi-year online advertising industry forecast for 2023, estimating that U.S. revenue will rise 13% year-over-year to $237 billion and 11% in 2024.

The analyst firm originally forecast between 10% and 11% growth in 2024, with between 9% and 10% growth in 2025 and reach more than 70% penetration of the overall ad market.

The revised model does not consider negative macro growth and recession, nor does it factor in a meaningful impact from additional privacy changes such as the elimination of third-party cookies for targeting — given the digital ad market ties in with consumer spending, the analyst firm said in a research note.

TikTok at 18% YoY, Amazon at 15% YoY, and Pinterest at 11% YoY, per the analyst firm, will become the fastest-growing companies.



“Near-term, we expect industry growth to reach 14% YoY in Q4, roughly in line with Q3 growth, which contemplates easier growth comps,” analyst wrote in the research note. “As we've articulated throughout the year, we see a number of potential risk factors to our forecasts for both ecommerce and online advertising, including a softening labor market, but also increasingly geo-political tensions.”

The most obvious change in growth points to any possible decline in consumer spending.

In the local markets, Yelp is expected to gain share, according to the note.

TikTok should continue to take ad-budget share, as well as retail media networks and CTV platforms accruing budget given lower-funnel and secular shifts to online from offline.

In Bard’s quarterly survey of 1,000 U.S. Internet users, the data shows “largely stable trends Pinterest and Instagram, and TikTok and Snapchat.” They are gaining traction through mind-share, increasing 3pts and 2pts, respectively. The data also shows stability for Meta, but there could be some seasonal shift from messaging to Instagram.

As other data has noted, social media ads continue to drive consumer shopping. In fact, some 33% of shoppers in Baird’s survey, higher than the last two quarters, confirm this trend.

Baird notes that it could potentially be due to faster Reels monetization and TikTok growth.

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