By Tony Silber
It’s been a couple of years now where many economists have predicted looming recession. And yet it hasn’t come. The U.S. economy remains stubbornly strong.
Will we be able to say the same about the advertising world, where a new round of predictions suggest a slowdown in ad spend for next year? The next few months will tell the story. For all we know, the advertising economy will remain strong, just like the overall economy.
Over the last 50 years, recessions have come every 10 years, more or less. But it’s been 14 years since the Great Recession of 2008-2009. You’d think we were overdue.
There was a mild recession in 1969-70. Another, more severe, in 1973-75. Then there was a severe recession in the early 1980s, and another one in the early nineties, and yet another in 2001-2003. And then the Great Recession.
Since then, we’ve avoided a major downturn, with the exception of the massive shock in 2020, when the pandemic hit. Perhaps that was the recession, and we’ll experience sustained growth in the years ahead.
All of this is to put the media industry into the framework of the larger economy. Now, after years of rapid growth in advertising spending and predictions of strength through 2025, two media forecasting firms are predicting that advertising growth will slow in 2023.
Ad revenue for media companies will grow by 4.8%, to $833 billion next year, according to Magna, a unit of Interpublic Group, which is one of the “Big Four” ad agency holding companies (along with WPP, Publicis, and Omnicom).
Magna had predicted in June that 2023 would produce a 6.3% increase, according to a recent report in the Wall Street Journal. Magna also revised its 2022 predication downward, to 6.6% from 9.2% in June. Non-political spending was weaker than expected, Magna said.
Vincent Létang, Magna EVP of global market research, told the Journal that it had reduced the growth expectation for almost every media category for next year, but still expects the market to stabilize. Marketing sectors, Magna said, such as consumer-packaged goods and finance could see flat ad spending in 2023, while entertainment, travel and betting will continue to be driven by regulatory relaxation and pandemic recovery. And automotive advertising could grow again after a period of moderate decline.
A separate forecast from WPP’s GroupM, also reported in the Wall Street Journal and other outlets, scaled back its forecast for growth as well. Ad revenue will grow 5.9% next year, the firm said, a reduction from an estimate of 6.4% in June. Globally, advertising excluding political spending will increase by 6.5%, GroupM said, down from its 8.4% forecast in June.
But the signals are decidedly mixed. One the one hand, spending in China will be lower because of the severe COVID-related lockdowns. On the other, marketers that feared the impact of inflation on their budgets have seen revenue relatively stable as sales held up, even as added costs were passed on to consumers.
And GroupM said a more universal downturn along the lines of 2001 or 2008 has not occurred because the economy is not in a bubble—rather, it’s in a post-COVID shakeout.
Let’s hope that’s correct. Watch this space for updates.