However, streaming is still on the rise. According to Magna, digital ad sales, including addressable linear campaigns and AVOD pre-rolls on connected TVs, keep growing. In 2022, these sales accounted for an average of 12% of total advertising revenues for broadcasters in top markets (U.S. and U.K. around 15%, Germany 9%, France 7%, Japan 2%). Broadcasters’ non-linear revenues grew by 10% to 20% across key markets last year, but there was a slowdown in the first half of 2023. Regardless, Magna notes that the scale does not compensate for the loss of linear ad sales thus far.
Elsewhere, digital pure-play advertising is on the rise, as it’s set for 8.5% growth, reaching $577 billion and 69% of total ad sales. Growth factors include ecommerce, retail media, media consumption shifts and stabilization in the data landscape. Social media formats are re-accelerating, expected to grow more than 9% to $172 billion, while short-form pure-play video advertising will grow 8.6% to $71 billion. Search/commerce formats will also remain large, approaching $300 billion for the year.
Within search/commerce, retail players are expected to generate $121 billion in advertising sales on the year, a 12% gain with product search and ecommerce sponsorship leading the way. Though the bulk of these ad sales will come from ecommerce pure players, traditional retailers are developing media capabilities that will have ad sales growing by 24% to $21 billion.
Where markets are heading
When it comes to markets, the strongest growth rate will come from India in 2023, as the country looks to gain 12.3% to reach $12.6 billion. Meanwhile, the Chinese ad market will recover faster than previously expected, rising 8.4%. Western European markets will stagnate this year, according to Magna, with Germany, France and Italy all below 3% growth across media, and negative returns for traditional media owners.
In the U.S., media owner advertising revenues will increase just 2.5% to $333 billion this year. Cross-platform video has some of the biggest struggles, dropping 8%. Publishing is expected to be down 6%, audio down 2% and direct mail down 7%. Though ad spend stagnated in the fourth quarter of 2022 and the first quarter of 2023, it’s expected to accelerate in the second half (which is a notion publishers have often been repeating in earnings calls).
Though big-ticket items typically struggle in economic downturns, Magna reports that the current situation is complex due to a number of factors. Firstly, high inflation, especially for food and drink products, is a challenge for CPG. Plus, unemployment remains low, which is key to keeping big-ticket purchases strong. And Lastly, travel and automotive are back in a big way while recovering from Covid-19 disruption and supply chain issues. The industries are growing spending by more than 10% in most markets on the year.
Meanwhile, several categories, such as tech and telecom, finance (except in some markets like Germany where high interest rates are reviving competition between investment and saving products) and restaurants have struggling sales and stagnating or declining marketing spending. Others have more promise than expected, including grocery retailers in markets such as Germany, France and the U.K.
Block-busted
Entertainment has also disappointed, according to Magna, which expected blockbuster releases and streaming to ramp up sales. Still, Magna expects entertainment brands to resume the market share grab in 2023 or 2024, especially with rebrands such as Max hitting the market and the influx of ad-supported tiers.