Global Ad Spend to Slow in 2023 With Retail Media and CTV on the Rise

Global advertising spend is set to increase at a slower pace by 3.8% next year, reaching $740.9 billion. It is predicted to strengthen the year after at 4.8% despite the economic slowdown currently faced by the world economy, with retail media expected to grow by more than one-fifth. According to Dentsu’s biannual Global Ad Spend Forecast—which examines data from across 58 markets—the level of spend will slow by 1.6% in comparison to its previous prediction of a 5.4% increase next year. Digital spend will continue to lead with 57.1% of spend planned for 2023, reaching $422.8 billion by the end of that year. That will be supported through increases in channels including video (+7.1%), paid social (+13.5%), search (+7.2%) and retail media (+22%). According to research released by IAB Europe this week, marketers are growing their partnerships with retailers as part of their plans to improve consumer reach and offset dependence on the diminishing third-party cookie. Almost all other channels will also experience growth next year too with TV ad spend set to increase by 0.2% to $182.7 billion, out of home at +2%, cinema at 6.1% and audio at +2%. Declines will continue to be experienced by newspapers and magazines, however, at a predicted -3.6%. By market, APAC is expected to record the most positive trajectory of 4% growth, followed by EMEA at 3.8% and then the Americas at 3.7%. Digital ad spend forecast broken down by region More than half of the markets analyzed (30 of 58) were revised down for 2023 compared on the report released in July 2022 due to macroeconomic challenges including the rise of inflation around costs for energy, food and fuel as well as interest rates. These are expected to impact consumer and business spend leading to a slowdown in expectations around advertising spend growth. Media price inflation will drive “a significant proportion” of the growth according to the report, with the top 12 markets predicted to keep to seeing prices grow by 0.6% against current growth of 3.4% across Linear TV due to the continued decline in scheduled TV viewing audiences. Price inflation is expected to be slower for other audiovisual formats such as connected TV (CTV), broadcaster video on-demand (BVOD), digital video and traditional media such as print and radio, with some exceptions by market and media. CTV spend is growing at a faster rate than traditional TV spend which was flat this year and set to decline by 1.9% next year. CTV saw 23.7% growth in 2022 which will slow to 20.2% next year. The recent introduction of advertising products by major players such as Netflix and Disney+ is anticipated to see them take a larger cut of the market as their new subscription models increase members. Spend predictions by industry sector The technology sector, despite layoffs reported across major platforms in recent months, is set to remain the highest growth sector with 6.8% with the continued increase in businesses digitalizing and technology products and services remaining in high demand. Consumers are however expected to be more cautious with their purchasing decisions and likely to postpone the upgrading of electronic devices such as smartphones. With the increased business focus on immediate gains to help ride out this temporary economic slowdown, we should expect to see more performance campaigns prioritizedPeter Huijboom, global CEO, media and global clients, Dentsu International Due to ongoing supply chain issues and the rising cost of energy and raw materials, the automotive is likely to see a drop, forecast at 6.2% during next year, despite a growing number of electric vehicles reaching the market. As we are now in a largely post-pandemic environment, the pharma sector has also slowed but will continue to be one of the highest growth sectors at 5.5% next year due to continued demand for Covid-19 products. However, compared to spend during the outbreak period, that will be a significant drop comparatively. The retail sector is forecast to grow by 4.8% with increasing inflations and living costs lowering customer spending power, but e-commerce is expected to “partially offset the negative consumer sentiment.” Travel and transport will slow its momentum from a surge in growth at 39.7% this year to 3.9% down to increased fuel costs and cost-of-living tightening consumers’ discretionary spend. Beyond 2023 In 2024, total advertising spending globally is predicted to reach $776.9 billion (+4.8%) with digital spend forecast to take up 58.2% of that. The following year, spend is forecast to slow slightly again at 4.5% to reach $811.6 billion. Peter Huijboom, global CEO, media and global clients at Dentsu International, described 2022 as “another strong year of growth” for the ad industry despite political and economic uncertainty, which would continue into 2023. “We need to be realistic on how this will impact the industry, the inventory, and the returns we should expect from available budgets,” he continued. UK Marketers' Confidence for 2023 Grows Despite Dim Hopes for Economy “With the increased business focus on immediate gains to help ride out this temporary economic slowdown, we should expect to see more performance campaigns prioritized, which in turn will impact the channel mix. This is likely to be one of the main reasons we are seeing such strong growth in digital in the short term, taking it up to 57.1% of all spend in 2023,” added Huijboom. Positives are also expected from Japan lifting its travel restrictions and its government stimulus to support the return of travel, which is expected to trigger a marketing drive as well as the Rugby World Cup and the FIFA Women’s World Cup also scheduled to take place next year.