Tariffs hang heavy over ad market
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President Trump's economic policies are starting to weigh heavily on the U.S. ad market, which was just starting to stabilize after years of pandemic-era volatility.
Why it matters: In addition to economic turbulence, ad-supported companies face very difficult comparisons from last year, which will make it difficult for media and tech companies to meet previous growth projections.
- 2024 marked the fastest year of U.S. ad spend growth since 1983, per analysts at MoffettNathanson, thanks to the presidential election, the Olympics and AI-driven advertising advancements.
Driving the news: The country's most prominent media and advertising analysts have started to forecast significant slowdowns in ad spend this year.
- Ad-buying giant Magna further reduced its 2025 advertising growth forecast last month, citing "the lack of economic visibility and a decline in confidence" that could impact marketing budgets.
- That followed a similar warning from Brian Wieser, a top advertising analyst, who believes the president's trade policies pose a more extreme threat to supply chains and corporate decision-making than previously expected.
- Media analysts at MoffettNathanson told clients in a note last week that slower GDP growth could result in roughly $45 billion in lost U.S. ad spend versus current forecasts. "Given the ongoing secular headwinds facing the linear TV ecosystem, we worry that television could mirror the fate of radio and newspapers during past recessions," they wrote.
Zoom out: While economic uncertainty will impact the entire ad market, certain categories will be hit harder.
- Chinese retailers that typically spend billions of ad dollars on platforms like Meta and Google have dramatically reduced ad spending in the U.S., per eMarketer. Temu and Shein have reduced their daily average U.S. ad investment by 31% and 19%, respectively, between March 31 and April 13, per Sensor Tower.
- Automotive companies, facing production uncertainty related to tariffs, are expected to reduce marketing spend, per Magna. This is especially true for foreign auto companies that face 25% import tariffs. Auto advertising began to recover last year following a significant chip shortage in 2022 and 2023, boosting local publishers and broadcasters.
- Consumer packaged goods companies, as well as restaurants, tend to be the most vulnerable to inflation, which is expected to remain high amid economic volatility. Stubborn inflation makes it hard for the Federal Reserve to cut interest rates despite pressure from President Trump.
- Restaurants and personal services: The service economy is expected to pull back significantly on ad spend amid tariff exposure from their international supply chains and broader consumer concerns around inflation.
- Tourism and travel: President Trump's aggressive stance toward the country's reliable international trade partners threatens billions of dollars across the U.S. travel and tourism industries. The most significant drop off thus far has been from Canadian visitors, followed by tourists from European countries. Both groups tend to be reliable spenders.
What to watch: While there are concerns about consumer discretionary spending in a recession, analysts are more bullish on subscription-based media services that are less dependent on advertising.
- Analysts at Macquarie last week said, following Netflix's positive earnings report, that the company's premium valuation "is likely supported by investor flight to safety."
- Experts also believe ad agency holding groups, such as Omnicom, Interpublic Group and WPP are better suited than some of their media clients to weather a possible economic downturn. "With highly variable cost structures, their earnings downside is somewhat cushioned, and multiples are already near historical troughs," analysts at MoffettNathanson wrote.
