Group M downgrades expected advertising growth for 2022
Advertising agency Group M expects global advertising to grow by 8.4% this year, down from 9.7% that the company forecasted in December last year. This means that the company agrees with adfirm Zenith that recently also downgraded its forecast for the year. Zenith went from from 9.1% to 8.0%.
Group M’s expected 8.4% growth excludes the impact of U.S. political advertising, which is on track to reach USD 13 billion in revenue this year, up from USD 12 billion in 2020.
“Coming off the lows of 2020 and the highs of 2021, the advertising market is settling into 2022, a year that’s seeing rising inflation, increased wages, mounting regulatory pressure on Big Tech and an overall effort by consumers and marketers to find their footing in a world that’s getting increasingly used to living with COVID-19”, Group M says in its updated forecast.
“While the economic future is impossible to predict with any certainty, we believe the underlying conditions for most consumers paint a far less negative picture of the risks of current inflationary pressures than many others think. It should be unsurprising after the extraordinary growth of 2021 that we would see a deceleration in 2022, especially among the largest digital players, and there are still meaningful sources of growth fuelling the global advertising industry.”
The company points at three factors for growth:
- Increasing numbers of new small businesses, coupled with their likely propensity to advertise at higher levels than the business they are replacing;
- Venture-funded “new economy” advertisers seeking growth;
- Chinese-based marketers advertising abroad are significant sources of growth despite some drag brought on by the (expected) deceleration of e-commerce and interest rate hikes.
Group M stresses that publishers and marketers with global strategies will be at an advantage.
“Looking at the competitive environment this year and next, it’s becoming clear that the largest streaming services are expanding their global reach, and major digital publishers and platforms are likely to seek global uniformity of their businesses rather than piecemeal changes related to fragmented national and state-based privacy regulations.”
“While global scale offers marketers easier access to a larger pool of audiences, there will still be challenges to face. U.S.-based streaming services are entering foreign markets and are positioned to take share from national players.”
“The limited advertising opportunities within streaming services coupled with the overall decline of linear television viewing means marketers should consider defining and setting new goals for the medium of TV as it may become less able to cost-effectively satisfy reach and frequency-based marketing goals.”
Group M expects growth in ad revenue for pure-play digital platforms of 12% in 2022, slower than the 32% pace in 2021.
“As a major driver of last year’s gains, perhaps it should have been imprudent for anyone to expect e-commerce-related growth to keep pace with the high-flying numbers of 2021, but the relative degree of deceleration — not necessarily decline — this category of advertisers is likely having on digital advertising appears significant.”
Television is expected to be up 4%. “Ad-supported streaming services are likely buoying the medium as they offer marketers a similar channel to hit their reach and frequency goals, but over time those connected TV environments are likely to capture shares of existing linear TV budgets more than they will drive money toward it.”
“Notably, television is becoming increasingly global in ways it never was before. Mostly U.S.-based streaming services continue to invest aggressively in local-language content as they move into foreign markets and position themselves to gain audience shares from historically dominant incumbent broadcasters with geographic limits to their operations.”
“The impact of government policies and preferences on the ad-supported media is another increasingly important trend impacting the industry. Larger scale efforts to curb the influence of major tech companies and regulate platforms, like the EU’s Digital Services Act, are taking aim at Apple, Google and Meta via de facto or de jure efforts to break up those companies.”
“Other regulatory initiatives are popping up in America, too, with some at the state-level taking a different, politically charged approach by attempting to codify into law that platforms cannot censor content on their sites as they would like.”
The company estimates that the top 25 media owners represent 74% of global advertising.
“Outside of China, the top 17 companies represented 70% of global advertising in 2021, an increase from 44% in 2016. Importantly, while eight of the top 25 are Chinese-based media owners, their ad revenue remains largely mutually exclusive and collectively exhaustive with Chinese-based media owners generating almost all their revenue in China, and almost no ad revenue in China generated by non-Chinese companies reaching Chinese consumers in China.
The top five sellers of advertising in 2021, a group including Google, Facebook, Alibaba, Bytedance and Amazon, generated USD 408 billion in ad revenue, or 53% of the global total.
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