This Year Next Year 2022 Global End-of-Year Forecast shows revised growth figures in 2022 globally but bright spots in Australia
Both Australia and global advertising market growth are set to slow in 2023 after double-digit results in 2022 off the back of slowing momentum across television and digital channels.
In its latest This Year Next Year 2022 Global End-of-Year Forecast, GroupM revised its global advertising growth expectations to from 8. 4 per cent to 6.5 per cent in 2022, largely thanks to lowered China expectations (from 3.3 per cent growth to 0.6 per cent decline). Excluding China, the holding group forecast advertising growth to hit 8.1 per cent this year.
The report also noted a dip in growth forecasts for the US from the 10.1 per cent estimated in June to 7.1 per cent. Together, these two markets should represent 55.5 per cent of total spend in 2022.
In 2023, global ad growth is set to reach 5.9 per cent, down again from the 6.4 per cent estimate GroupM released in June. Driving momentum will be connected TV, retail media and fast-growing markets such as India. For example, GroupM expected retail media to reach $110.7 billion in 2022, up from the September estimate of $101 billion.
From an Australian perspective, the total 2022 advertising market growth has been forecast at 10.9 per cent or $14.5 billion. By contrast, 2023 total market growth is estimated at 3.4 per cent.
Driving the revised figures as a recalibration of predictions for TV spend overall from 4.8 per cent to 3.7 per cent. In fact, GroupM predicted a “watershed” year for TV next year, with a possible 0.2 per cent decline year-on-year that’s expected to continue in the years ahead. Growth was expected to remain between 1 per cent and 3 per cent over the next five years as a result of connected TV hitting double digits, counterbalancing linear TV decline.
And it’ll be video on-demand that will provide diversity and growth from 2023 onwards, the report stated, adding the launch of advertising options by the likes of Disney and Netflix aren’t expected to be of significant clout in 2023.
Another growth engine locally is digital commerce, which GroupM predicted would return to double-digit growth in 2023 (10 per cent).
Across other channels, GroupM forecast digital advertising growth for 2022 of 9.3 per cent, down from 11.5 per cent in June. This follows 31.9 per cent growth in 2021 and sees digital advertising now representing 67 per cent of total spend this year. This is expected to hit 73 per cent by 2027.
Out-of-home advertising meanwhile, is expected to lift 2.2 per cent globally, or 18.1 per cent excluding China. Several markets, including Australia, are expected to surpass 2019 spending levels by 2024. And in 2023, supported by programmatic activation, OOH will reach a new revenue peak locally, up 11.3 per cent over pre-pandemic level, the report stated.
Audio advertising is projected to grow 3.8 per cent globally in 2022 and 6 per cent in Australia, then decelerate to 1.3 per cent globally in 2023.
But even with the caution and some slowing of growth, the report said Australia, along with Brazil, France, India and Japan, will grow ahead of inflation. As a result, GroupM was fairly optimistic about the global market, even as broader dialogue indicates advertisers are going in 2023 with caution.
The report pointed out only two of the 62 markets it tracks are expected to see negative growth in nominal terms in 2022.
“A majority of markets, 35, are forecasting growth, albeit below the average global rate of inflation this year, which is 8.8 per cent per the International Monetary Fund [IMF] October 2022 World Economic Outlook,” the report authors stated. “The other 25 markets are projecting growth above global inflation, and while some still fall below inflation levels in their own country… 16 markets are outpacing levels of inflation at home, including Australia, Brazil, India, Kenya, Malaysia, Mexico, South Africa and South Korea.”
GroupM remains cautiously optimistic into the New Year too. For one, large declines appear limited to select channels and markets. For another, large advertisers are cautious but still recording revenue gains.
“For the most part, we have heard executives at some of the largest global advertisers voice concern about inflation and cost of living crises, but revenue has remained relatively resilient as companies pass on added costs to consumers and sales continue to hold up,” the report stated.
Unemployment also remains low and digital, both pure-play as well as digital extensions of traditional media, continue to grow.
“Looking at next year, when the IMF expects global inflation to drop to 6.5 per cent, we see a similar trend with 26 markets predicting advertising growth above average global inflation, 32 markets forecasting nominal growth below the rate of inflation, and just four markets predicting nominal decline [Austria, Italy, New Zealand and Spain],” the report stated. “Our global forecast calls for growth of 5.9 per cent in 2023.”
As a further way of balancing its views against the swings of the last two pandemic years, GroupM looked at advertising growth on a three-year, compounded basis.
“Despite headlines portending the doom of Big Tech and advertising, we estimate the three-year compound annual growth rate [CAGR] for total advertising at 8.8 per cent for 2019 -2022, practically identical to the 8.7 per cent rate for the previous three years [2016–2019],” the report authors stated.
“That said, of the three major secular drivers of advertising growth we discussed in our June forecast – Chinese advertisers, digital endemics and new business formation – two are currently under some duress.”
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