GroupM forecasts the global advertising industry to grow this year at 8.4%, slightly down on its December 9.7% prediction, and sees strength ahead depsite some challenging economic indicators.
The global media agency group doesn’t think the advertising industry is in for a recession, rather that economic growth will exceed the negatives of inflation.
Some analysts are lowering expectations. Investment bank Morgan Stanley: “We see rising risk that ad budget growth will slow and perhaps dramatically in ‘23.”
Uncertainty is coming from the war in Ukraine, rising petrol prices, supply chain issues, surging inflation and resulting higher bank interest rates
GroupM’s 2022 Mid-Year Advertising Forecast is in line with the latest from Zenith which put global advertising expenditure at 8% in 2022, a minor downgrade from the 9.1% growth rate forecast in December.
“We know that there's a chance of a global recession," Brian Weiser, global president of business intelligence at GroupM, told a briefing.
“But it shouldn't be the baseline case. Now, we also recognise that individual markets will experience different outcomes, certainly places which produce a lot of their own energy might be beneficiaries.”
But GroupM doesn't see a perilous economic state ahead.
On the plus side, the economy is helped by low unemployment, high household savings and strong new business formation.
Interest rates are rising, but from historic lows, justifying expectations for a deceleration of economic growth without decline.
GroupM says cuts in spending by some marketers will be offset by gains from others and many of the same factors that drove unprecedented growth for the industry in 2021 will continue in 2022.
GroupM ran correlations around the world between advertising growth and the price of oil over 20 years.
Higher energy prices in most cases correlated with higher advertising. Only two countries had a negative correlation.
“Higher energy prices typically mean there is more demand for all goods, including things which lead to more advertising,” Weiser says.
“There's still a lot of healthy consumer demand out there. We see consumers having reasonably healthy savings levels throughout the pandemic.
“Unemployment is pretty low in most parts of the world on a historical basis, wage gains in many places, or maybe not as much as inflation, but they're up and that does help mitigate some of the price increases.
“And so when we put that all together, we think that all this contributes to deceleration, which should have been expected but not decline.
“If we've run at a 3% or 3.5% global GDP number in real terms, inflation adjusted, we're looking at a number that might be better than 2019, which was ultimately a pretty good year for advertising.
“The big point is: Don't be too worried yet be mindful of the risks. But it's not our base case assumption and shouldn't be yours either at this point.”
GroupM forecasts:
Digital advertising: Growth in ad revenue for pure-play digital platforms of 12% in 2022, an expected deceleration from 2021’s 30% growth rate.
Under a broader definition of digital advertising, which includes traditional media’s digital extensions, GroupM estimates the industry will account for $617 billion in 2022, or 73% of its total.
Television advertising. To grow 4% in 2022.
Television is becoming increasingly global in ways it never was before. Mostly US-based streaming services continue to invest aggressively in local-language content as they move into foreign markets.
Connected TV environments, including digital ad inventory from streaming services, will capture shares of existing budgets much more than they will drive new ones into the industry.
GroupM: "While television remains better than many alternatives for the purposes of satisfying reach and frequency goals, its reduced effectiveness will only encourage marketers to explore alternative strategies."
OOH advertising. The median market is expecting 12% growth, as many of these markets have approached or are soon to exceed their pre-pandemic highs. GroupM: "We expect outdoor to exceed its 2019 volumes next year, indicating that much of the growth we are seeing at present can still be characterized as recovery driven."
GroupM says expectations are higher In many markets for 2022 now versus December expectations.
However, Chna, the world’s second largest market, is now expected to grow at a much slower pace versus prior forecasts.
Looking out over the next five years, India is expected to grow by double digit levels, while many markets are now expected for grow by mid-to-high single digits:
France, Germany, Brazil and Canada are expected to grow by high single digits.
The US, Australia and the UK are more likely to grow by mid-single digits.
China is expected to grow by low single digits.
The top five sellers of advertising in 2021, a group including Google, Facebook, Alibaba and Bytedance, generated $US408 billion in ad revenue, or 53% of the global total.
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