Global adspend to slow as social media warned of $40bn black hole

Social media companies are set to record a multi-billion dollar shortfall over 2022 and 2023, while growth forecasts for adspend across all channels and markets are cut by $90bn.

Global adspend is on course to rise in 2022, but ease significantly next year.

The latest Ad Spend Outlook 2022/23: Impacts of the Economic Slowdown from WARC forecasts ad spend across the world to rise by 8.3% ($67.3bn) to $880.9bn this year. In 2023 however, market growth is set to be just 2.6%, with cooling economic drivers and third-party cookie blocking online cited as the main drivers for the slowdown.

The latest forecasts are a downgrade to WARC’s last global forecast at the end of last year, and taken together, the growth projections for 2022 and 2023 are reduced by almost $90bn. 2022’s predicted growth was said to be lifted by a positive first half of the year for holding companies, with events such as the US midterm elections and the FIFA World Cup in Qatar boosting the second half.

WARC’s study of the ad spend in 100 markets found that ad investment across all channels was up by almost 25% in the first six months of this year compared to the same period in 2021, buoyed by much of the world still coping with COVID restrictions in the early parts of last year.

Q3 is expected to be 7% ahead of Q3 2021, while the events at the end of the year are influencing growth projections of 8.8% in Q4 2022 compared to Q4 2021. Social media to see a $40bn shortfall WARC is predicting that Apple’s privacy push alongside Google’s forthcoming – albeit delayed – move to block third-party cookies from Google Chrome will shave $40bn from the bottom line of social media companies over 2022 and 2023.

Social media companies were also said to be more dependent on the fortunes of small and medium-sized businesses, who largely buy ad space directly and who WARC notes are already bearing the strain of worsening economic conditions compared to their holding company counterparts.

“There is less ‘stickiness’ within the online sector; it is far easier for an advertiser to turn off their programmatic spend than it is to back out of an advanced TV commitment,” the report said.

Social media ad spend is set to rise by 11.5% this year but the growth will slow to 5.2% in 2023. This includes predicted flat revenue growth for Meta this year and next, with Instagram set to bear up forecast declines for Facebook.

Growth in spend on Instagram globally is forecast to be 6.7% in 2023, compared to a fall of 8.6% for Facebook, which is already tipped to dip by 8.2% this year.

TikTok to grow ahead of competitors but the pace will slow

TikTok meanwhile will see strong – but slowing growth compared to what’s been previously. Growth in TikTok spend is forecast to hit 143.4% in 2022, and 41.5% next year.

Other ‘growers’ in the social media space – Snap and Twitter – will be hit by far slower growth than previously seen, WARC said, while a number of Chinese platforms are set to record losses. Snap’s projected growth of 5.8% and Twitter’s of 2.7% is a far cry from the 64.3% and 40.5% seen in 2021 respectively.

Video streaming spend set to outstrip total market

Ad spend in the video streaming sector is set to forge ahead of the global market, with WARC forecasting investment growth of 8.4% this year and 7% next year.

Advertising-funded video on demand (AVOD) including the likes of Amazon Prime, Hulu and YouTube is expected to grow to reach a value of nearly $65bn in 2023. YouTube however has been vulnerable to Apple’s privacy changes, which will mean an easing growth in ad revenue – to 5.6% – next year.

The forecasts point to a 39.4% share of the global AVOD market for YouTube, down 0.9 percentage points from 2021, with competition approaching from Disney+ and Netflix as both prepare to introduce advertising this year.

Across other channels, online audio is forecast to grow by 25.6% this year before slowing to 10.1% next year. Within pure-play internet, which collectively is forecast to see adspend rise by 11.5% in 2022 and 5.5% in 2023, search is predicted to be the biggest hitter, growing by 12.5% this year and 6.2% next year, compared with much more muted 2023 growth rates for online display (3.6%) and online classified (0.8%).

Sectors slowing down but not cutting adspend

Very few sectors are set to cut adspend this year and next, with all but automotive expected to increase investment in 2022, according to the latest research.

Retail is set to increase adspend by 6.8% this year and 3.6% in 2023 despite inflationary pressures and prospects of tighter margins. Technology and electronics is forecast to lead growth over the two years – with investment projected to rise by a quarter this year, and 11.5% next year.

The four sectors expected to cut adspend in 2023 are transport and tourism (-0.4%), alcoholic drinks (-1.1%), financial services (-4.5%) and automotive (-12.4%).

“Offering measured performance in a climate where return on investment becomes paramount”

James McDonald, Director of Data, Intelligence & Forecasting, WARC, said: “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.

“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.