The latest forecasts show advertising revenue in the US still growing this year despite shaky economic conditions.
And part of the reason the market isn’t falling from a cliff is that “media innovation fueling marketing demand".
Advertising revenue in the US market is forecast to grow 3.4% to $US326 billion this year (down from 3.7% in previous forecasts), according to Magna, the media intelligence and investment unit of global holding group IPG.
US media owner advertising revenues grew by 6% in 2022 (excluding cyclical ad spend) to $315 billion.
However, ad spend slowed significantly in the second half and December quarter ad sales were flat.
In 2023, economic signals are mixed, including slow but continued GDP growth, receding inflation, a resilient job market, while financial turbulence is generating anxiety among consumers and businesses.
However, a key difference in the US is that a large chunk of home loans rates are on set terms over decades. In Australia, fixed terms are more usuals for up to three years.
This gives the US consumer a big break when it comes to home budgeting.
But Magna and GroupM were in December forecasting a slowing, but still showing strength, in Australia's advertising market growth in 2023.
The latest Magna analysis says the rise of retail media networks, the growth of ad-supported video streaming and the recovery of the automotive industry are among organic growth factors mitigating the impact of macro-economic uncertainty.
Ros Allison, head of product & innovation, MAGNA Australia, on the latest US numbers: “We’re seeing a similar picture in the Australian market.
"Media budgets have evolved from traditional ‘advertising’ budgets, investing in pure brand building advertising to now working harder across a broader marketing capability.
“Those budgets now encompass big brand building, closer and more integrated connections with audiences as well as short term performance gains, responding to intent, as well as martech, data and targeting innovation.
“This range of capability, greater quantification of the impact of strategy and the knowledge systems to refine and control tactical levers has helped budget resilience in the US and also in Australia.
“Responsibility for media budgets now assumes the ability to understand and control impact on audiences and deliver outcomes beyond pure price. Media budgets can now stretch, adjusting for different economic environments to fulfil short term sales goals while nurturing and growing longer term brand objectives.
“Also contributing to budget resilience in Australia is the expectation that the current contraction and economic sentiment is likely to be relatively short lived. We’re expecting a shorter term trough on sentiment, with the return of key categories, a rebound for our export markets and peak inflation now behind us.
“Our clients are looking to growth now and as we quickly come out the other side of the current market squeeze.”
Australian media analyst Steve Allen, Pearman's director of strategy and research, believes Australia won’t match US growth.
“US Consumers (for whatever reason) are streets ahead of us in consumer confidence, mostly because the mortgage market is a totally different construction to ours; typical 30 year fixed mortgage,” he told AdNews.
“Thus our nine consecutive RBA rate rises to ameliorate inflation,… US 6% February, AUS 6.8%.
“We are far more susceptible to this regime and resultant RBA Rate rises. Bottom line, we are different (for sure) but somewhat the same!”
Vincent Létang, EVP, Global Market Research at MAGNA: “In a similar economic climate, ten or twenty years ago, the US advertising market would almost certainly fall off a cliff.
“Things are different in 2023 because of media innovation fueling marketing demand. The organic drivers that boosted the ad market in 2021 and the first half of 2022 are still around and mitigating the impact of stressful economic signals.
“Such organic drivers include the rise of retail media networks which are redirecting billions of marketing budgets dollars into advertising formats.
“In addition, with long-form OTT streaming going mainstream and increasingly ad-supported, brands finally find cost-effective solutions to reconnect with audiences that had become hard and expensive to reach through linear television.
“These are some of the reasons why advertising spending continued to grow in the second half of 2022, despite economic uncertainty, war, inflation, and very high growth comps.
“For the same reasons, MAGNA expects advertising activity to continue to grow, albeit at a slower pace, in 2023.
“An additional growth factor for 2023 is the recovery of the automotive market, a top five vertical for most media types in America.”
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