Patrick McGee on Apple’s first foldable iPhone
On Wednesday, Apple accomplished two firsts: It unveiled its first foldable iPhone at its first launch event fronted by new CEO John Ternus. Apple in…
Thought Leader: Patrick McGee
Ad market finally begins to stabilize
After years of pandemic-driven volatility, the global ad market is finally expected to normalize over the next five years, according to new forecasts.
Why it matters: Uncertainty in the ad market led to a record number of job cuts across the media and entertainment sectors over the past year.
- While Big Tech firms experienced some volatility, most were able to regain their footing faster than traditional media publishers.
State of play:Â The global ad market is expected to grow 5.3% this year, down from 5.8% growth in 2023, according to a year-end forecast from GroupM, one of the largest global advertising agencies.
- In North America, the ad market is expected to grow 4.2% (excluding political advertising), down from 5.6% in 2024.
- The explosive growth of political advertising spend in the U.S. is expected to artificially inflate ad forecasts during alternating-year election cycles for the next few years. (For example, with political advertising included, the North American ad market is expected to grow 7.8% next year.)
- Other cyclical events, like the Olympics, will also artificially boost ad growth in 2024.
Between the lines:Â For both global and North American forecasts, the ad market will still grow in real-terms, but slower growth rates mean publishers that rely on ad revenue will need to temper their expectations.
- Magna, another global ad agency, posted slightly more optimistic forecasts at the year’s end, but they are directionally in line with those from GroupM.
How we got here:Â For years, the advertising industry grew at roughly the same rate as gross domestic product (GDP).
- In a world where traditional advertising was dominated mostly by auto manufacturers, consumer package goods companies and mass market retailers, the growth of the advertising industry was largely correlated to economic output.
- But the rise of new ad formats online and new digital businesses pushed the ad market to grow faster than GDP during the late 2010s, driving temporary but unsustainable double-digit growth for digital advertising.
- The pandemic not only wiped out that momentum in 2020, but it caused a ripple effect of broader uncertainty for the ad market in the three years that followed.
State of play:Â Heading into 2024, analysts predict mid-single-digit ad growth for the foreseeable future, thanks in large part to the maturity of the digital ad market.
- Digital advertising will represent roughly 70% of total global ad revenue in 2024, per GroupM.
- “Pure play” digital advertising, such as search, social and e-commerce — which saw double-digit percentage growth increases year-over-year between 2015 and 2019 — is now expected to grow at single digital percentages year-over-year between 2024 and 2028.
- In addition to reaching a point of digital maturity, “pure play” digital advertising growth from search and social media is also likely to be impacted by regulatory concerns around privacy and competition. Retail advertising growth is expected to rise in the U.S., but slow globally next year, thanks to a slowdown in China’s retail market.
Zoom in:Â All 2024 forecasts suggest spending on traditional media, such as print, radio and television, will decline year-over-year in annual growth, but their digital alternatives aren’t expected to make up for those losses.
- Even with more streaming platforms adding advertising tiers and traditional TV providers investing in connected TV, there isn’t expected to be a meaningful uptick in overall television ad spend, according to advertising analyst Brian Wieser.
- “Many of the world’s largest sellers of TV advertising are in a precarious position going into 2024,” he wrote in a note to clients last week, citing “a relatively fixed pool of spending from marketers” for TV ad spend, regardless of whether it’s digital or linear.
Be smart:Â Some of the factors causing consistent slower growth for the next few years are still linked back to the pandemic.
- For example, sales and marketing budgets for digital-first companies have slowed due to higher interest rates.
- More advertisers, particularly auto manufacturers, retailers and entertainment companies, are leaning into direct-to-consumer marketing through their own apps, minimizing some external ad spend.
The big picture:Â The current trends are expected to continue to favor large, global tech platforms, thanks to their global reach and investments in AI-driven marketing tools.
- Google, Meta, and Amazon captured 56% of total ad spend outside of China last year, per Magna.
What to watch:Â In addition to politics and sports, the automotive, travel, pharmaceutical and consumer package goods (CPG) industries are expected to post strong advertising growth next year, per Magna.
- CPG companies, which make up 20% of all global ad spend, are expected to benefit from lower inflation and sports events.
- Entertainment marketing is expected to slow as an ongoing response to the 2023 Hollywood strikes. Sports betting ads, which would typically increase in line with growth in live sporting events, will see weakened growth globally thanks to increased regulatory pressure on betting in Europe
Relevant and recent posts
Mark Esper on the Houthis and the U.S.-Iran Conflict
Former U.S. Secretary of Defense and WWSG speaker Mark Esper joined America Reports to discuss escalating tensions in the Middle East, including the potential for…
Thought Leader: Mark Esper
Tony Abbott on the Threat of Extremist Islamism
Former Australian Prime Minister and WWSG speaker Tony Abbott discusses what he sees as the persistent threat posed by extremist Islamist ideology and its implications…
Thought Leader: Tony Abbott
More with this speaker
Sara Fischer on the Landmark AI Copyright Battle
Thought Leader: Sara Fischer
Sara Fischer on Amazon’s New Advertising Lawsuit
Thought Leader: Sara Fischer
Sara Fischer on Big Tech’s Regulatory Reckoning
Thought Leader: Sara Fischer