MAGNA has raised the 2023 revenue forecast for digital media owners from +7.9% to +9.6% but downgraded the ad revenue expectation for traditional media owners in radio, television, publishing, and OOH, from -3.2% to -3.6%.
Digital pure players will capture a record 69% of total ad spend in 2023 with the big three of Google, Meta and Amazon alone in capturing 59%, said MAGNA.
“Looking at 2024, the easy first half comps and influx of retail media dollars into digital advertising lead us to increase the non-cyclical growth forecast from +5.0% to +5.6%,” the investment and intelligence company said.
“We raise the growth forecast for pure-play digital media owners to +9.8% but the forecast for traditional media owners is downgraded to -2.0% from -1.5%. Incorporating cyclical events (political ad spend, and additional spending around summer Olympics) the revenue forecast for traditional media owners will reach +4.3% and the grand total will reach +8.0% to $364bn.”
Looking at individual media types, MAGNA said that digital media formats will outperform again in the next 18 months, growing by high-single digits or low double-digits.
“Social and short video formats are expected to grow ad revenues by +10.9% and +9.1%, respectively. These formats are mature, however, and MAGNA does not expect annual growth rates to ever grow back to the +20% or +30% that were observed pre-COVID or in 2021,” MAGNA said.
“Search/Commerce formats will continue to be boosted by retail media activity. Retail media networks are already generating 30% of search advertising sales (including Amazon) and this will grow by +22% in 2023 and +17% in 2024. Total search, including traditional search engines like Google, will grow by +9.8% in 2024 to $143bn.
“Non-cyclical ad sales will be down -3% for national TV and -5% for local TV next year. However, spending around the summer Olympics and upcoming Presidential election will mitigate the revenue erosion for national TV and bring huge growth for local TV.”
Based on MAGNA’s analysis of media companies’ financial reports, ad revenue and ad spend recovered in the second quarter, the US ad market was up by +2.9% in the first half (excluding cyclical), against hard comps.
However, only pure-play digital media formats (Search, Commerce, Social, Pureplay Short-Form Video) really benefitted from the increased ad spend so far (+8.7% yoy in 2Q23, up from +5.6% in 1Q and +7.2% for 1H23).
Meanwhile, traditional media companies (TV, radio, publishing, out-of-home, cinema) struggled with eroding ad sales (-4.1% in 2Q23 after -6.0% in 1Q23).
Ad sales grew by almost +12% for Social media formats in the second quarter, compared with +7% in 1Q23 and almost zero in the two previous quarters. Short-form digital video (Youtube, Twitch or outstream video) re-accelerated to +7.5% from zero in 1Q and Search/Commerce remained robust at almost +9%, driven by retail media activity.
When it comes to traditional media owners, 2Q23 was marginally better than 1Q23 but most ad formats continue to suffer declining sales. Cross-platform national TV ad sales and Audio ad sales were down -4%, local TV -5%, Publishing -7%. The only traditional media category to grow in first half was OOH with +2.5% in the second quarter.
The ad revenues of traditional media owners continue to stagnate or decline despite the growth of their digital formats. In the first half of 2023, non-linear TV ad sales (AVOD, CTV, FAST etc) grew by +7%, podcasting advertising grew by +14% and DOOH grew by +9%.
Vincent Létang, EVP of global market intelligence and author of the report, said six months ago, the media industry was bracing for recession, but advertisers kept calm and continued to support their brands and sales through media investment.
“As the US economy and advertising spending were both stronger than expected so far this year, and digital media is finally recovering from its 2022 woes, MAGNA raises its full-year ad revenue growth forecast to +5.2% for 2023 to reach $337 billion,” he said.