KUALA LUMPUR (June 22): Global advertising growth in 2022 will come in at 9.2%, lower than the previously forecast 12%, on the back of an economic slowdown and restrictions on data-driven targeting of digital ads, said global media investment and intelligence company Magna Global.
In its June 2022 advertising forecast released last week, the firm said it was always expecting the global advertising market to slow down significantly in 2022 following the unprecedented levels of growth observed in 2021 (global: +23%; US: +26%) caused by a once-in-a-lifetime “planetary alignment” of factors: the V-shaped economic recovery and the marketing consequences of post-Covid-19 lifestyles.
In its December 2021 update, Magna was expecting a 12% rise for global, all-media advertising revenues in 2022.
“The reduction of our forecast from 12% to 9% is due to two main headwinds: a global economic slowdown since the second quarter (2Q) (full-year real gross domestic product growth at 3.6% according to IMF compared with 4.9% six months ago), and the mounting restrictions on data-driven targeting affecting digital advertising sales (e.g. the impact of Apple iOS changes have had on display and social ad formats).
“The economic slowdown will really start to affect ad markets in 2Q and 3Q, and Magna anticipates lower growth over the period of 2Q to 4Q, as well as throughout 2023,” it said.
Nevertheless, Magna said the full-year 2022 forecast downgrade would have been much steeper if not for a stronger-than-expected 1Q recorded in most markets (+14% in the US).
It said growth expectations would also be lower if not for the strong cyclical factors of 2022: the US midterm election (bringing almost US$7 billion [about RM30.79 billion] to local TV stations and digital media), and two global sports events: the Beijing Winter Olympics and the FIFA World Cup (Qatar, November).
Magna said without cyclical ad dollars, television revenue growth would be below +2% instead of growing by 4% this year.
Magna executive vice president of global market research and author of the report Vincent Létang said most of the headwinds facing the advertising market this year were expected: economic landing following a red-hot 2021, continued supply issues generating inflation, and mounting privacy restrictions slowing down the growth of digital ad formats.
He said that on top of that, the war in Ukraine now exacerbates inflation and economic uncertainty.
“Nevertheless, Magna believes full-year advertising revenues will grow again in 2022 at a healthy rate, helped by a strong start to the year, on top of organic and cyclical drivers.
“Organic growth factors (continued and broad-based e-commerce spending, as well as digital marketing adoption), strong cyclical drivers (record political spending in the US, the Winter Olympics and the FIFA World Cup), and the strength of emerging or recovering industry verticals (travel, entertainment betting and technology) will generate enough marketing demand to offset headwinds and keep the advertising economy growing in full-year 2022,” he said.
Magna said advertising revenues of traditional media owners will grow by 4% to US$282 billion, i.e. 94% of the pre-Covid-19 market size of 2019.
It said out-of-home will perform best with advertising revenues growing by +10% to US$30 billion (already 93% of 2019 levels), followed by audio and television (both +4%) and publishing (-3%).
The firm said without cyclical ad dollars, traditional media revenues would grow by just 2% instead of 4% this year.
It said traditional media companies are deriving a growing share of their ad revenues from digital formats (AVOD, streaming and podcasting). In some markets, these are already contributing to 10% of total TV ad sales, 20% in audio and 50% in publishing.
Digital advertising formats
Magna said revenues from digital advertising formats (search, social, video, banners and digital audio) will reach US$534 billion this year (+13%).
It said digital formats now represent 65% of total advertising sales worldwide.
Search will remain the largest advertising format (US$265 billion), ahead of social (+11% to US$158 billion), while digital video formats will be the most dynamic (+16% to US$68 billion).
All the same long-term drivers of digital advertising spending growth are in place, with consumers streaming more, spending online via e-commerce channels, and engaging with more digital media while working from home.
However, Magna said there are also new headwinds, including broader economic and inflationary pressures, as well as the impact of Apple’s iOS privacy changes and impending future data collection changes that are offsetting some of that organic strength.
As a result, it said the mix of digital spending will shift slightly in 2022 and beyond, away from social media and towards keyword formats and other campaign strategies that can directly attribute advertising spending to sales.
Magna said it was always expecting social media advertising to decelerate in 2022 following the explosive growth in 2021 (+36%).
In the December 2021 update, Magna was predicting +18% for 2022 (half the growth of 2021).
“In this update, we downgrade the growth forecast by seven percentage points to +11%, i.e. more than any other ad format.
“This is because social ad formats are hit by a combination of headwinds, with the last two in the list below being endemic/specific to the social ad format,” it said.
In line with strong recovery growth in ad spent, both Media Prima Berhad (4502) and Seni Jaya Corporation Berhad (9431) are expected to be beneficiaries.
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