Advertising Slowdown Started in 2002, Will Extend Into 2023

A post-pandemic ad-spend boom has already begun to recede.

Two of the world’s biggest media-buying firms projected a slowdown in the rate of ad-sales growth for both 2022 and 2023, citing factors that include a reduced pace of business in China as well as a pullback by several key advertising categories in the face of inflation and the possibility of a recession.

WPP’s GroupM called for global ad spend in 2022 to grow by 6.5%, down from a projection of 8.4% in June. The large media-investment firm, which buys advertising inventory on behalf of marketers, estimated global ad spend would grow 5.9% in 2023, down from a prediction of 6.4% in June. Meanwhile, Interpublic Group’s Magna estimates that global ad spend in 2023 will climb 5%, slowing from 7% this year. The projection is off 1.5% from a previous forecast in June, and Magna cited a “deteriorating macroeconomic outlook” as the basis for its estimate.

“The slowdown has already started,” says Vincent Letang, executive vice president of global marketing intelligence for Magna, in an interview.

Such a forecast is likely to intensify worries among U.S. media, which recognized the trend earlier this year during the industry’s annual “upfront” market, when traditional media companies try to sell the bulk of their commercial inventory. Many big TV owners agreed to do deals at lower-than-expected pricing in exchange for driving a greater volume of commitments from advertisers, a tried-and-true strategy often used when markets are in turmoil or the possibility of a recession starts to loom.

Many TV companies have already begun to pursue layoffs, with Comcast, Warner Bros. Discovery and AMC Networks among the entertainment players looking to cut costs.

Some of the patterns on the rise in this period are likely to have far-reaching effects. “In the U.S., in the closing months of 2022, streaming providers have claimed virtually all the most watched TV programs other than live sports, which is still dominated by linear networks and cable channels,” GroupM said in a research note. “But as Apple, Amazon and other non-traditional players enter the market for sports rights, even this last bastion of linear viewership won’t be guaranteed. Sports alone certainly haven’t been enough to stem the losses of video customers from cable and satellite providers. We estimate that pay TV penetration, including multichannel video programming distributors (MVPDs) and virtual MVPDs (vMVPDs) will fall below 50% of U.S. TV households in 2025.”

In the United States, ad sales in 2023 are expected to rise 5.8%, according to Magna, compared with 6.2% for 2022, when U.S. ad sales are expected to total $310.2 billion, excluding cyclical events.

Media companies will face headwinds next year. Magna predicts financial-services companies, grappling with high interest rates and the decline of the cryptocurrency industry, are likely to pull back on advertising. Consumer-products manufacturers are also likely to spend less next year, the company said. And auto advertising “is a big question mark, due to the uncertainty in macroeconomic environment and
supply issues,” Magna says. Ad spending from entertainment companies, travel marketing and facilitators of betting is likely to be more robust.

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