Digital Advertising Growth Will Slow This Year, Magna Report Predicts

TV ad spend remains ‘resilient’ as other traditional platforms see more dramatic losses

Digital ad revenues are expected to grow 14% this year, a marked slowdown from the 18-20% of growth in the four consecutive years prior.
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As digital media penetration reaches near-universal status, digital advertising revenues around the world, including in the U.S., are anticipated to slow by several percentage points compared to years past, according to Magna Global’s newest advertising forecast.

The report from IPG Mediabrands’ intelligence arm, which forecasts advertising spend and trends across different platforms and sectors, predicted that digital ad revenues will grow by 14% this year to reach $304 billion. That’s a marked slowdown from the 18-20% annual growth observed in the four consecutive years prior. The bulk of that spend is expected to come from ad impressions, as well as clicks from smartphones and other mobile devices.

In the U.S., total advertising sales are expected to reach an all-time high of $220 billion, a 3% increase from last year, and digital ad sales are expected to make up about 57% of that number, or about $126 billion. The growth of ad spend on digital ad formats also slowed in the U.S., increasing 16% year-over-year instead of the consistent six quarters of between 19% and 22% growth.

Vincent Létang, evp of global market intelligence at Magna and the author of the report, said a deceleration in digital media consumption rates, due to near-universal penetration rates, was also reason for the slowed growth.

“I think we’ve reached a tipping point with the sheer scale of digital advertising,” Létang said, adding that the slowdown, which Magna and other firms have been anticipating for years, appeared to happen rather suddenly. “Overall, we consider that the slowdown we were predicting is happening. Nothing can grow for 20% forever.”

That’s not to say digital media isn’t still expanding at rates that other platforms would envy; it’s still expected to grow in double digits in most countries, Létang said, as ad spend on other platforms declines.

However, even as linear ad platforms—including TV, radio and traditional publishers—see consistent shrinkage year-over-year, Létang said linear television continues to prove “resilient” while other traditional ad platforms see more dramatic losses. Linear television ad revenues around the world are expected to decrease by 2% around the world to $175 billion, and by 3% in the U.S. to $41 billion, which Létang said is partially due to a lack of major cyclical events that prompt short-term surges in TV spend. (In the U.S., that anticipated decline is also attributable to a decline in TV spend from some previously reliable spenders, like automotive brands and movie studios.)

Outside the U.S., linear TV ad revenues are expected to increase slightly— about 1%—in 2019, which Létang said will be because of strong demand from traditional verticals like pharma or CPG brands that choose TV for its brand-safety reputation, as well as bigger TV ad investments from major direct-to-consumer brands and the tech sector that are graduating from digital-only marketing campaigns into broader TV buys.

“The demand for traditional TV is still strong, and because the supply is shrinking—pretty much everywhere now linear television views are falling—declining supply and stable demand mechanically produces inflation,” Létang said.

There are other reasons why linear ad spend is seeing tempered losses, including the continued advertiser interest in OTT. Ad spend on ad-supported video-on-demand platforms ranging from platforms like Hulu to broadcasters’ own full-episode players is expected to stabilize television broadcasters’ total advertising revenues around the world. That spend on those AVOD platforms, though, is expected to account for only 5% of total global television revenues in 2019.

A similar dynamic can be seen with linear radio ad revenues, which are decreasing steadily but which are being offset partially from advertising spend on digital audio advertising platforms like Spotify and Pandora. Podcast advertising revenues, which made up up about 15% of all digital audio advertising in 2018, are expected to grow by nearly 30% this year, another growing sector that Létang said will help stabilize audio advertising.

In 2020, Magna predicted that overall advertising growth will re-accelerate, because of major media events like the Summer Olympics and the presidential election cycle. The intelligence firm predicts advertising growth will increase 5.8% to $233 billion, and said the anticipated $6.2 billion in incremental advertising revenue will help mitigate an anticipated economic slowdown.