Global spending on advertising is on course to rise by 8.3% – or $67.3 billion – to $880.9 billion this year, boosted by a positive first half for ad agency holding companies and a jolt from the U.S. midterm elections and the men’s FIFA World Cup in Qatar this November. But after that, WARC’s latest forecast calls for growth to cool down to 2.6% in 2023, as advertising outlays are inhibited by slowing economic conditions and the blocking of third-party cookies online. This is according to The Ad Spend Outlook 2022/23: Impacts of The Economic Slowdown from WARC.
The new projections, based on data from 100 ad markets worldwide, amount to a downgrade of 4.3 percentage points to 2022 growth and 5.7 percentage points to 2023’s prospects, compared to its previous global forecast in December 2021. Taken together, the new forecasts translate into a reduction of almost $90 billion in growth potential for the global ad market this year and next.
Audio revenues are forecast to grow 7.2% this year, with online experiencing the largest year-over-year growth (+25.6%). That includes 27.7% growth in audio streaming and a 19.3% lift in podcast revenues. Broadcast radio is more tempered this year with local up 3.7% and national up 2.6% for total radio growth of 3.2%. Remember these are global figures, your mileage may vary. Audio is forecast to be flat in 2023 with radio down 2.4% and online up 10.1%.
The new forecast is a tale of two cities for advertisers. The massive ad agency holding companies, which serve many of the world’s biggest brands, got off to a positive start in 2022, with all the big firms revising forward guidance upward for the year ahead. But it is a different story among the small to medium-sized businesses (SMBs), who largely buy ad space directly from local media outlets like radio and TV stations. These SMBS are “bearing the brunt of worsening economic conditions,” WARC says. This slowdown in small and mid-sized advertising activity will hurt social media behemoths the most, a sector already struggling to grapple with the impact of Apple’s new privacy measures. After shooting up 47.1% in 2021, WARC says social media ad spend will rise 11.5% this year before tailing off to just 5.2% in 2023 – the slowest rate yet for the sector.
It’s not just businesses that are feeling the pinch of soaring inflation. So are consumers, especially low earners for whom energy and food costs eat up a higher proportion of income. But spending intentions among high earners remain “bullishly positive” per Deloitte monitoring. That’s good news for radio stations targeting categories like technology & electronics (+11.5% in 2023), pharma & healthcare (+7.5%) and household & domestic (+6.5%), all of which are expected to post healthy increases in ad spending to capture any available disposable income.
Very few product sectors are cutting advertising investment. Of the 18 categories monitored by WARC, all are on track to increase ad spend this year – except automotive. Only four categories are expected to cut spend in 2023: transportation & tourism (-0.4%), alcoholic beverages (-1.1%), financial services (-4.5%) and automotive (-12.4%).
The technology & electronics sector – the third largest of the 18 monitored by WARC – is forecast to lead growth this year and next (+25.0% in 2022 and +11.5% in 2023), culminating in a total global spend of $85.1 billion by 2023. It is followed by the pharma & healthcare sector, which is set to ramp up by 11.0% this year and another 7.5% in 2023, by when investment will have topped $60 billion globally.
Retail is the largest category monitored by WARC and it includes Amazon, the world’s largest advertiser by spend. Retail is set to increase advertising investment by 6.8% this year and 3.6% next year, despite retailers seeing tighter margins from the wrath of inflation. Struggling with both supply- and demand-side pressures, automotive is the only category set to cut advertising spend in both 2022 (-5.3%) and 2023 (-12.4%).
“With the growth rate of global output now set to halve and acute supply-side pressures fanning inflation, the economic slowdown has removed close to $90 billion from global ad market growth prospects this year and next,” says James McDonald, Director of Data, Intelligence & Forecasting, WARC, and author of the research. “Yet brands are still spending as the COVID recovery continues, and global ad trade remains on course to top $1trillion in value by 2025. Platforms with rich sources of first-party data – most notably Amazon, Google and Apple – are well placed to weather future headwinds by offering measured performance in a climate where return on investment becomes paramount.”