U.S. ad forecast cut again for 2023

Experts at Magna, one of the world's largest ad-buying firms, have trimmed their 2023 U.S. advertising spend forecasts slightly to account for continued uncertainty in the economy.

Yes, but: The ad market is still growing, just at a slower rate. It remains healthy largely due to innovation in formats, said Vincent Létang, Magna's executive vice president of global market research.

• "I feel optimistic because the advertising market is more resilient, robust and diversified than it was 20 years ago," Létang said. Back then, "ad spend would have been on the decline, but now we have a mature, large diversified landscape of digital advertising formats."

Details: The 2023 ad market is expected to grow 3.4% this year, down from the 3.7% that Magna predicted in December. That figure accounts for the absence of cyclical events, like the U.S. elections and the Olympics.

• Still, the ad market will reach a record high of $326 billion this year, thanks in large part to huge growth in over-the-top, or streaming, ads as well as short-form mobile video ads that run on platforms like TikTok and Instagram.
• "All of the digital formats provide innovation that's increasingly attractive to brands," Létang said.
• Those formats will make up for slower or negative growth in traditional ad formats, such as print, TV and radio. Local television, which typically sees huge ad declines in years without national elections, will decrease by more than 21%.

Be smart: Before the ad market began to meaningfully decline last year, Magna had higher hopes for 2023.

• It predicted global ad revenue would grow 6.3% for 2023 in June, but then lowered that forecast to 4.8% in September as budgets began to dry up in the third quarter.

The big picture: The advertising market typically grows at roughly the same rate as the GDP. But even during COVID, when both supply and demand for many goods were restricted, the ad market didn't completely crater the way it did during the 2008 financial crisis, Létang notes.

• Digital growth, fueled by new mediums like streaming and short-form video, has helped offset slower growth in television and radio advertising.

Be smart: A possible TikTok ban has not been factored into Magna's forecasts, in part because any short-form video spend that would've gone to TikTok would likely just migrate to other short-form video platforms, like Instagram or Snapchat.

What to watch: Looking ahead, Magna predicts that the market will start to show signs of improvement in the second half of the year, which will make up for the minimal to flat growth in the ad market in the first two quarters.

• The rise of e-commerce advertising, driven by consumer package goods brands shifting their retail marketing budgets toward digital advertising from in-store placements, will help fuel digital ad growth organically, in addition to the growth in streaming advertising.
• The comeback of automotive advertising, following two years of supply chain hurdles, will also help the ad market recover. The rise of electric vehicles is creating more competition that should fuel more growth in the auto ad sector long term, Magna notes. Overall, auto ad spend by car brands and dealers is expected to grow 10%–15% this year.
• Ad spending by the travel and entertainment industries is also slated to grow, while restaurants and retail brands will show less momentum in 2023.

Go deeper: Ad growth expected to slow further in 2023