Sep 22, 2020 - Economy

Ad market expected to recover in 2021

Data: MAGNA; Chart: Naema Ahmed/Axios (NOTE: National and Local TV estimates include cyclical spending on things like U.S. elections and the Olympics.)

The advertising market is expected to recover next year, according to the latest forecast from Magna, an advertising agency.

By the numbers: "If the mainstream macro-economic scenario holds, and the U.S. GDP grows by 3.2%, we are looking at a total ad market that would recover by 4% next year," says Vincent Letang, EVP and Managing Partner of Global Market Intelligence at Magna.

Yes but: The growth will mostly be in digital ads, while linear ad markets like TV and radio will barely stabilize.

Driving the news: Letang attributes the gradual stabilization of the market to 4 things:

  1. The economic reopening
  2. Political spend increases
  3. The return of sports to TV
  4. The Olympics

The big picture: "We think sports programs drives more than 20% TV ad spend in the U.S.," says Letang. Looking ahead to 2021, Letang says the Summer Olympics should generate roughly $800 million dollars of additional ad spend in 2021.

What's next: Nearly every industry is expected to start increasing spend on advertising, but two of the top client verticals, automotive and retail, will continue to struggle.

  • "Automotive was an industry that was already stagnating pre-COVID," says Letang. "Even if the economy recovers, the high unemployment rate will be an inhibitor to large ticket items like cars."
  • Automotive advertising slumps, combined with an off-year for political advertising, is going to severely impact local TV advertising.
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