Magna, a media investment firm that conducts industry research, reduced its U.S. advertising growth forecast for 2023, saying a weaker economic environment is likely to cut into spending.
The firm, a unit of Interpublic Group of Cos.' Mediabrands, cut its growth forecast for next year to 4.8% from an earlier prediction of 5.8% in June.
Despite the less optimistic outlook, certain factors will still underpin advertising growth, according to Vincent Létang, executive vice president of global market intelligence at Magna and author of the company's reports on ad spending. Among those factors are growing retail media networks bringing marketing budgets into digital advertising, programmatic spending in digital audio and digital out-of-home formats, and new ad-supported tiers from streaming services such as Disney+ and Netflix, Mr. Létang said in the report.
Magna also cut its expectations on nonpolitical ad spending for the second half of this year. The firm said it saw stronger ad sales in the first half than it had estimated in June as well as stronger-than-expected political spending. But it added that the uncertain economy would lead some sectors to spend less than they might have in the second half.
Ad growth for all of 2022 will come in at 9.8%, Magna said, less than the 11.1% forecast in June.
Excluding cyclical political and international sports events, ad spending this year will grow 8.1%, Magna anticipated, down from the 9.5% increase it predicted in June.
"Economic uncertainty and rising inflation are affecting several industries and driving brands and local businesses to moderate their marketing expenses in the second half," Magna said.
Items like food, drinks, personal care and household goods "are especially at risk as they are forced to increase product prices and face the possibility of consumers trading down in favor of cheaper brands. Restaurants and retail face a similar business challenge while some industries, like mortgage lenders, see their businesses suffer from the rise of interest rates," Magna said.
Media owners' U.S. ad revenue will cross the $300 billion mark this year for the first time, reaching an expected $323 billion, Magna forecast.
Comments