After a period of “massive expansion” during the pandemic, the U.S.ad industry is settling into a period of more normalized growth, according to respected media and advertising analyst/consultant Brian Wieser.The lower end of mid-single digit growth is the prognosis going forward, “which should be considered normal, positive conditions for the industry,” he says.
Total ad revenue will grow 2.0% to $363 billion in 2023, before surging 8.1% in 2024 including political advertising.
While a few factors that supported the last decade’s robust expansion remain, others “are unlikely to return any time soon,” Wieser predicts in his
Madison and Wall newsletter.Among them are a decade of access to cheap capital that provided “vast sums” of money for the “advertising pursuit of sometimes profitless growth.” While hot ad categories come and go, he says it’s hard to imagine new verticals coming along that that will pony up massive dollars thrown around by the crypto-currency, rapid delivery, and DTC consumer goods categories.
“If anything, it could be considered a positive that the industry didn’t fall faster, or even decline over the past year and a half,” Wieser writes, “especially as much of the industry seemed to try to talk itself into a downturn last year by fearing for a recession that never came.” In fact, the former President of GroupM Business repeatedly warned that recessionary fears were overblown, given the fat savings accounts of wealthier consumers and “significant disruptions” to labor markets, which empowered workers to find higher paying jobs.In fact, Wieser says high inflation “should have boosted the overall ad market” since most marketers manage their budgets for advertising on a percentage-of-revenue basis.
While the third and fourth quarters of 2023 are poised for growth of 6% and 8%, respectively, next year will be marked by gains in the 4-5% range, excluding the effects of political advertising.Political will continue to break records and “impact virtually every type of media with increasing intensity going forward,” he forecasts.
That will account for 3-4% swings in growth each year going forward.
Wieser offers growth rates for more than 20 different forms of media.Following are some highlights, which exclude the impact of political advertising:
‘Digital Advertising’s Dominance Expands, Led By Retail Media’
Search, social media, commerce media/retail media and other digital platforms such as YouTube, Yahoo, and Apple now account for 64% of all advertising and are expected to grow 11% this year.
Retail Media is the standout, on track to grow 20% in 2023 to $42 billion, led by Amazon.Digital will account for three of every four ad dollars booked by 2028.
‘National TV: Significant Challenges Get Worse From Here’
The TV ad sector is undergoing “an existential crisis” caused by accelerating cord cutting and the Hollywood strikes, now compounded by comments made by Charter Communications that it could walk away from its cable TV business if it can’t come to terms with Disney.
If carriage agreements aren’t reached between network owners and carriers, Wieser predicts consumers will turn to OTT video MVPDs like Fubo, YouTube TV or Sling to access packages of their favorite channels.This would have “meaningful” consequences for network TV ad revenues.
Local TV will be impacted by similar trends, “with low single digit underlying declines,” although “local broadcast probably fares better than local cable given the free-to-air nature of local broadcast.” Outsized political budgets in even years “will go a long way towards sustaining the business,” Wieser adds.
‘Audio Is Unlikely To Grow Any Year Soon, Although Digital Shifts Are Favorable’
Wieser is calling for audio advertising to be flat in the coming years, “supported by high degrees of effectiveness and ongoing investments into digital services, including podcasts.” This he says, will help the industry better capture ad dollars from big national brands “who might otherwise have avoided locally-skewed traditional radio.” Audio growth “will remain limited,” he predicts, because the smaller advertisers who have long dominated radio “continue to have easy access to more scalable alternatives, such as the large digital platforms.”
Meanwhile, publishing will “continue to face pressure” requiring publishers to put greater emphasis on subscription or other revenue sources.Likewise, direct mail will similarly experience ongoing declines.
Finally, Wieser’s outlook calls for $17 billion in political advertising for 2024 which he notes is “only modestly more” than 2020’s $14 billion.“Political advertising has become an increasingly important component of almost all forms of media, not only local broadcasting, where it will likely retain an outsized role given its effectiveness in driving election outcomes,” but also digital which will continue to gain political ad share..
