New forecasts for the state of the ad market still point to growth in ad investment next year despite a backdrop including potential recessions, rising interest rates and continued political uncertainty impacting on both consumer and business spend.
Adspend across the world is expected to grow by 3.8% in 2023 to almost $741bn, according to the latest dentsu Global Ad Spend Forecasts report, combining data from 58 global markets.
But an analysis of the top spending markets ( the US, China, Japan, UK, Germany, France, Australia, Brazil, India, Canada, Italy and Spain) shows that the growth in 2023 will largely come from media price inflation, meaning that at constant prices, ad spend is predicted to drop by 0.6%, compared to a 3.4% growth at current prices.
The pace of growth is less than half that predicted for this year, which is set to be 8% as we close out 2022, meaning ad investment will hit around $713.6bn.
All regions are expected to see growth next year – with APAC leading the charge at 4%, but only marginally ahead of the Americas (3.7%) and EMEA (3.8%). However, evidence of the slowdown in the pace of growth is clear, with dentsu downgrading their overall global growth forecast by 1.6 percentage points since the 5.4% predicted in the agency’s July analysis.
Digital to take the lion’s share of adspend for next two years
The pace of growth for digital adspend continues compared to other channels, according to dentsu’s report, and digital will account for the lion’s share of investment both next year and beyond.
Digital is forecast to account for 57.1% of spend planned for 2023, and 58.2% in 2024. This will equate to a spend of $422.8bn across digital next year.
Across APAC, just over 62% of adspend share is forecast to be through digital in 2023, and both the Americas and EMEA are set to spend more than half their adspend in digital channels.
These channels are also predicted to see the strongest rate of growth, though this is set to ease over the forecast period to 2025. Growth in digital channels is forecast to be 13.7% as we close out 2022, easing to 7.2% next year, and 6.9% in 2024.
But within digital, next year’s strongest growth will be found in retail media, with adspend set to grow in the buoyant channel by 22%. Paid social is forecast to rise by 13.5%, while search and video is predicted to see a growth of 7.2% and 7.1% respectively.
Peter Huijboom, Global CEO, Media and Global Clients, dentsu international said: “With the increased business focus on immediate gains to help ride out this temporary economic slowdown, we should expect to see more performance campaigns prioritised, which in turn will impact the channel mix. This is likely to be one of the main reasons we are seeing such strong growth in digital in the short term.”
Almost all other channels are expedited to see growth, but at a significantly more muted rate. Television adspend is expected to rise by 0.2% next year, but connected TV spend is growing far faster than its traditional counterpart, at a forecast rate of 20.2% in 2023.
This trend is likely to continue as streaming services like Netflix and Disney+ look to continue to fuel their revenue growth through advertising models amid a growth in subscriber bases.
Audio and out-of-home are both expected to see spend grow by 2%. Adspend in newspapers and magazines will fall – at a forecast rate of 3.6% – but dentsu noted that online news and magazines will see growth as publishers pivot from print.
Stronger growth post 2023 globally
Despite a slower 2023, the following two years are predicted to pick up for adspend across the globe, says dentsu, with 2024 set to grow in investment by 4.8% to hit almost $777bn, and 2025 spend rising by 4.5%.
All three key regions are forecast to grow by similar levels over 2024 and 2025, with EMEA slightly edging ahead at 5.4% and 4.8 growth respectively. But the bulk of spend will remain in the Americas, which is forecast to hit $355.6bn in 2024, and $371.7bn the following year.
Huijboom commented: “2022 has proven to be another strong year of growth for the ad industry, despite the political and economic uncertainty that surfaced. It is clear from our report and forecast the effect of this is being felt into 2023 too, and we need to be realistic on how this will impact the industry, the inventory, and the returns we should expect from available budgets.