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Downsizing advertising forecasts

Big downgrading of advertising forecasts for 2022 and 2023

Global advertising spend will increase 8.3% to reach USD 880.9 billion in 2022 boosted by the US elections and the FIFA World Cup. Next year, growth will slow down to 2.6% explained by gloomy economic forecasts and blocking of third party cookies, according to a forecast from marketing firm WARC. The new forecast is a downgrade compared to the company´s forecast in December last year.

”The new projections, based on data from 100 ad markets worldwide, amount to a downgrade of 4.3 percentage points (pp) to 2022 growth and 5.7pp to 2023’s prospects, compared to WARC’s previous global forecast in December 2021 – a reduction of close to USD 90 billion in potential growth over the two years.”

Social media ad spend will be up 11.5% in 2022 and 5.2% in 2023, its slowest ever period of growth, the forecast says. In 2021 the growth was 47.1%.

Advertising-based video on demand is expected to grow 8.0% in 2022 and 7.6% in 2023 to reach a value of  USD 65 billion.

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WARC expects the impact of Apple’s privacy measures on social media companies that rely on cross-site tracking will be in the region of a USD 40 billion hit to their bottom lines over the course of this and the coming year. Most are expected to see far less growth than they are used to over the forecast period.”YouTube’s fortunes have also proven vulnerable to privacy changes on Apple devices;

WARC believes that YouTube’s advertising revenue will rise 7.3% this year (compared to +45.9% in 2021), but that its growth will then ease to 5.6% in 2023.”

Just four of the 18 product sectors that WARC monitors are expected to cut ad spend in 2023: transport & tourism (-0.4%), alcoholic drinks (-1.1%), financial services (-4.5%) and automotive (-12.4%).

”Small and medium sized businesses are big spenders on social advertising, and as they are hit hard they will struggle to spend.”

Advertising spend in the video streaming sector is set to grow faster than the total ad market this year (+8.4%) and next year (+7.0%). The advertising-funded video on demand (AVOD) sector – including Hulu, Amazon Prime Video and YouTube – is expected to rise 8.0% this year and then a further 7.6% in 2023 to reach a value of almost  USD 65 billion.

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”Broadcaster-owned streamers are also set to grow their advertising income this year (+9.7%) and next (+5.2%), but from a far lower base (reaching USD 18.5 billion in 2023). Linear TV, meanwhile, will grow by 3.6% to USD 180 billion (20.4% of all advertising spend) but the market is then on course to record a 4.5% loss in the absence of these events next year.”

“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 $90bn from global ad market growth prospects this year and next”, says James McDonald, Director of Data, Intelligence & Forecasting, WARC.

“Yet brands are still spending as the Covid recovery continues, and global ad trade remains on course to top $1trn 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.”

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