New Research by MAGNA, a unit of IPG Mediabrands, reveals 74% of consumers highly value their data privacy and will reward brands who are responsible data stewards with 23% increased purchase intent
New York, NY- July 12, 2022 –The way that companies handle personal data is a hot-button issue among consumers, according to a new study by MAGNA Media Trials, MAGNA’s industry-leading proprietary research offering, and Ketch, a privacy and data governance platform. The study, “The Person Behind the Data,” found increase in purchase intent of 23% for brands and companies with responsible data practices. Further, the study found that data privacy is a top priority to 74% of respondents.
The study explored the opinions of primary purchasers and decision makers about how companies handle their data. Privacy is as important a shared value for companies to focus on as environmental sustainability, and diversity and inclusion, with respondents ranking all three at highest levels of importance. Meanwhile, companies would do well to provide greater transparency and control for consumers, as 82% voiced concern about how their personal data is gathered and used.
“The findings highlight that offering meaningful transparency and greater choice over data collection and use is a commercial imperative. Creating a thoughtful, people-friendly experience for expressing those choices is a key component of trustworthy data practice that delivers to consumer expectation,” said Arielle Garcia, Chief Privacy Officer, at UM. “When people understand and appreciate the benefits of sharing their personal information with a company that they trust, they are more willing to participate in that exchange. In sum, these findings underscore the opportunity for companies that take a cross-functional approach to privacy and data initiatives, with stakeholders across legal, privacy, marketing, sales, IT, and customer experience.”
Other study findings include:
Lack of Transparency and Control: 57% of respondents agreed that not knowing where data is going or how it is used was a problem, and 64% said they felt they did not have full control of their data.
The Value Exchange: While 82% were concerned how data was gathered and used, 83% of respondents could see the value of sharing their data. Some of the benefits of sharing data include learning about new products (45%) having a personalized experience (45%) and receiving a benefit from the company (43%)
Storage Wars: How long companies store their data impacted trust (40%) and purchase intent (52%) more so than the amount of data collected, level of transparency and data-sharing practices.
Challenges by Industry: The study examined various industry verticals and found data collection practices impact purchase intent somewhat differently—Amount of data collected, by far, concerns telecom users at 55% while retail shoppers cited data sharing practices as their greatest concern at 44%.
“People see the value in data sharing but they are concerned about how companies are handling their personal information and think they should be doing more,” said Kara Manatt, EVP, Managing Director, Intelligence Solutions, at MAGNA. “It is an important issue that effects the bottom line and even long-term brand preference. Marketers spend billions of dollars and years building how people feel about their brands, and now, increasingly, data practices play a growing role in the brand preference and trust.”
“Brands are looking for the responsible path forward. What I love about this study is it confirms how important data privacy is to consumers in their relationship with brands and puts the numbers to that trust” said Jonathan Joseph, Head of Solutions & Marketing at Ketch. “Consumers care about data privacy, they understand the value exchange when sharing data, and will make purchase decisions based on how brands handle their data.”
“The Person Behind the Data,” surveyed a nationally representative sample of 2,751 people, in two (POV and conjoint) online surveys and incorporated the feedback from five, diversely populated focus groups.
MAGNA is the leading global media investment and intelligence company. Our trusted insights, proprietary trials offerings, industry-leading negotiation and unparalleled consultative solutions deliver an actionable marketplace advantage for our clients and subscribers.
We are a team of experts driven by results, integrity and inquisitiveness. We operate across five key competencies, supporting clients and cross-functional teams through partnership, education, accountability, connectivity and enablement. For more information, please visit our website: https://magnaglobal.com/ and follow us on LinkedIn and Twitter.
About Ketch
Ketch enables businesses to build trust with consumers and drive growth through data. Ketch’s Trust-by-Design Platform is a coordinated set of applications, infrastructure, and APIs that collapses the cost and complexity of privacy operations and mobilizes responsibly gathered data for deeper customer engagement and top-line growth. To learn more, visitketch.com.
Media Contact:
Zinnia Gill
Mediabrands
Vice President, Global Corporate Communications
(646) 965-4271
Social media can help them develop a two-way relationship with people, rather than just sharing their messages
Respondents to a new study conducted by Magna Media Trials in partnership with Twitter had a strong message for brands: It is no longer satisfactory when they “talk the talk,” and they must also “walk the walk.”
The study found that brands clearly benefit from cultural involvement and, while there are many actions they can take in order to ensure that they are culturally relevant, accountability is the most important factor in the minds of consumers.
Media accounted for 67% of what drives a brand’s cultural relevance, and the two companies found that social media, in particular, gives those brands a pathway to impactful brand action by enabling them to form two-way relationships with people, to listen to what those people have to say and to incorporate their feedback into their actions.
Magna Media Trials and Twitter found that brand cultural relevance is highly correlated with metrics including brand favorability, brand preference and purchase intent.
The two companies shared the following takeaways for brands:
Be consistent: Magna Media Trials and Twitter found that younger people, in particular, are especially likely to see brands as culturally relevant when they show a consistent commitment to a cause.
Develop a two-way relationship with people: Brands should go beyond using media to simply put out a series of messages and get involved in the earned ecosystem, where they can converse and collect feedback.
Donations are a tangible way to show accountability: While people want brands to put their money where their mouth is, people are willing to do the same and pay more for brands that are donating.
Brands must embrace inclusivity: Creative inclusion goes beyond positioning brands as culturally relevant—it meets expectations and is a strong driver of purchase intent and brand favorability.
Actions speak louder by industry norms: The strength of brand actions varies by industry vertical. For example, sustainability is critical for consumer packaged goods, having an even bigger impact on the bottom line than the brand making donations.
Twitter vice president of global business partners Stephanie Prager said in a statement, “Life’s events play out across social media—Twitter is called the world’s town square by many for that reason—making the category the logical place for brands to share their stories and values and engage with people. Being part of the conversation in real-time, staying current and communicating through culture are some of the attributes brands can build through proactive, culturally relevant social media strategies.”
Magna executive vp, intelligence solutions Kara Manatt added, “The results not only show that brands should be owning their brand actions, but also telling a measurable story about them over time. Social media serves as a critical ingredient because it allows brands to own their own narrative around their place in culture and, in addition, build ‘listen/react’ relationships with people.”
Study shows the strong relationship between brand cultural relevance and the amount consumers are willing to pay for brands
New York, NY- June 16, 2022 – New research conducted by MAGNA Media Trials, MAGNA’s industry-leading proprietary research offering, in partnership with Twitter, quantifies the benefits and drivers of brand cultural relevance today. The study, “Cultural Relevance Drivers: Understanding the Building Blocks of Brand Relevance,” reveals that brands clearly benefit from cultural involvement even to the extent of people willing to invest more in those that are perceived as more culturally relevant (based on correlation of R2=0.9786). The study found that people are no longer satisfied that brands “talk the talk,” they must also “walk the walk.” While there are many types of actions brands can take to ensure cultural relevance, accountability is now table stakes in the minds of consumers.
Another key finding from the study highlights the clear opportunity marketers have to make a big impact, with media accounting for 67% of what drives brand cultural relevance. Social media, in particular, allows brands a pathway to achieve the topmost impactful brand action – developing a 2-way relationship with people, by listening to what they have to say and reacting to their feedback. The implication is that brands should go beyond using media to simply put out a series of messages and get involved in places where they can converse and collect feedback.
“The results not only show that brands should be owning their brand actions, but also telling a measurable story about them over time,” said Kara Manatt, EVP, Intelligence Solutions, MAGNA. “Social media serves as a critical ingredient because it allows brands to own their own narrative around their place in culture and, in addition, build ‘listen/react’ relationships with people.”
Additional key findings from the study include:
Cultural relevance pays: Brand cultural relevance is highly correlated with metrics that matter, including Brand Favorability (R2=0.797), Purchase Intent (R2=0.791), and Brand Preference over other brands (R2=0.994).
Donations are a tangible way to show accountability: While people want brands to put their money where their mouth is, people are willing to do the same and pay more for brands that are donating.
Brands must embrace inclusivity: Creative inclusion goes beyond positioning brands as culturally relevant – it meets expectations and is a strong driver of purchase intent and brand favorability.
Actions speak louder by industry norms: The strength of brand actions varies by industry vertical. For example, sustainability is critical for CPG, having an even bigger impact on the bottom line than the brand making donations.
“Life’s events play out across social media—Twitter is called the world’s town square by many for that reason—making the category the logical place for brands to share their stories and values and engage with people,” said Stephanie Prager, VP, Global Business Partner at Twitter. “Being part of the conversation in real-time, staying current and communicating through culture are some of the attributes brands can build through proactive, culturally relevant social media strategies.”
The methodology used in the study included both qualitative and quantitative components. Focus groups were utilized during the qualitative phase to help define brand cultural relevance and uncover potential drivers. The quantitative phase consisted of a drivers’ analysis based on 4,917 online surveys among a nationally representative sample.
About Twitter, Inc. Twitter (NYSE: TWTR) is what’s happening and what people are talking about right now. To learn more, visit about.twitter.com and follow @Twitter. Let’s talk.
About MAGNA
MAGNA is the leading global media investment and intelligence company. Our trusted insights, proprietary trials offerings, industry-leading negotiation and unparalleled consultative solutions deliver an actionable marketplace advantage for our clients and subscribers.
We are a team of experts driven by results, integrity and inquisitiveness. We operate across five key competencies, supporting clients and cross-functional teams through partnership, education, accountability, connectivity and enablement. For more information, please visit our website: https://magnaglobal.com/ and follow us on LinkedIn and Twitter.
Media Contact:
Zinnia Gill
Mediabrands
Vice President, Global Corporate Communications
(646) 965-4271
Despite the current challenging economic and geopolitical conditions, Interpublic Group of Cos.’ Magna is forecasting growth in ad markets around the world. The media agency forecasts a 9.2% growth in global ad revenue to $816 billion by the end of 2022.
The agency released its advertising forecast this morning, one day after WPP’s GroupM published its ad revenue midyear forecast. Magna similarly predicts that the growth of the ad industry will slow down: the 9.2% global growth rate drops from last year’s midyear prediction of 14%.
“Most of the headwinds facing the advertising market this year were expected,” the forecast reads, quoting Vincent Létang, Magna’s global market research executive VP. Létang cited several factors that have contributed to Magna’s anticipation of the ad industry’s deceleration, including the unprecedented boom of the market in 2021, the supply chain issues and inflation that predated 2022, and privacy restriction changes exemplified by Apple’s iOS privacy updates.
The global economy has also witnessed a slowdown since the second quarter of this year, and the geopolitical situation in Ukraine has increased energy prices, discouraged trade, and exacerbated global inflation. All these factors will inhibit the expansion of the ad industry in the second half of 2022, said Magna, which accordingly abated its prediction of the 2022 global ad industry—at the end of 2021, it predicted global ad revenue would grow by 12% this year.
‘Organic and cyclical factors’
Nevertheless, the ad market is still slated to expand, thanks to “organic and cyclical factors,” Magna predicts.
In a phone interview, Létang enumerated numerous “organic” growth factors of the ad industry. In digital marketing and online media, for example, video and audio marketing is still far from reaching its plateau. “Millions of small businesses are still developing,” said Létang, “and digital advertising was doing none of that two years ago.”
Through the expansion of the digital advertising landscape that started last year, e-commerce skyrocketed, and the development of new products in consumer packaged goods and pharmaceuticals have been shifting market priorities. In addition, impending policy changes, exemplified by E.U.’s ban on gas-powered vehicles in 2035, have accelerated the innovation of “production, technology, and communication,” said Létang.
Magna’s “cyclical factors” refer to periodic events that stimulate the ad industry. “The U.S. election is an obvious one,” said Létang, which will generate “about $8 billion of political advertising that will go into local television.” Létang acknowledges that not all political ads this year will contribute to an increase in ad revenue, but “90% of [U.S.’s political ads in 2022] will be incremental.”
Aside from the U.S.’s local political events, international sports festivities will also contribute to the increase in global ad revenue. Létang mentioned the Beijing Winter Olympics, which took place last winter, and the Qatar World Cup, as examples. The World Cup in particular will have a stronger impact on the global advertising industry, given that it will be held in November, right before the holiday season, when marketing campaigns abound and ad rates soar.
Magna observes that these organic and cyclical factors have already translated to a strong ad market in the first quarter of 2022, in which the U.S., for example, saw a 14% increase in ad revenue. “Consumer mobility finally recovered,” Létang said, “especially when it comes to transit.” Other industries also saw organic growth, most noticeably the betting, tech and entertainment industries.
Digital, traditional media, TV
Magna predicts digital advertising sales to grow by 13% to reach $534 billion, 65% of the total ad sales, in 2022. Among different digital ad formats, digital video will see the most growth of 16%, while search will occupy the biggest market share of $265 billion. Social advertising will only experience an 11% growth, lower than both video and search. Besides the aforementioned Apple privacy restriction updates, the plateauing of user and client numbers on social media is another factor in the slow growth of social advertising, according to Létang.
Advertising revenue for traditional media (TV, radio, out-of-home, print, and cinema) will grow by 4% to $282 billion, which represents 94% of the pre-COVID traditional media revenue. As the global pandemic situation alleviates, out-of-home ad revenue will welcome a 10% increase. Audio and TV will grow by 4%, while publishing will decrease by 3%, Magna reports. Much of such growth of traditional media will come from ads generated by cyclical events—traditional media ad revenue would otherwise only grow by 2%.
Traditional media is slated to grow thanks to its digital shares. In publishing and audio, for example, 50% and 20% of their revenues, respectively, come from ads in the digital format.
TV ad sales also benefit from its digital share, specifically AVOD. Magna predicts AVOD revenue to grow by 10%-15%.
National forecasts
Magna expects U.S. advertising revenue to grow by 11.1%, to reach “a new all-time high at $326 billion” by the end of 2022 and account for 39.9% of the global market. Notable driving factors for U.S.’s ad industry include political ads and the recovery of entertainment and travel. On the other hand, pure-play digital media and social media, due to Apple’s new privacy restrictions, will continue to see the growth of their ad sales decelerate. CPG categories, due to the increasing gas price and the global supply chain issues, may stagnate or decrease their ad budgets.
Among other top-15 advertising markets around the world, India and South Korea will both post strong growth of 15% and 11% respectively, Magna predicts.
China, the second-largest ad market, which accounts for 15.4% of global ad revenue, will grow by only 8%. Magna attributes China’s lethargic market to the nation’s strict COVID lockdowns and increasingly tightened regulatory environment for digital media.
Germany is among the countries that will suffer the most from the current economic and geopolitical events of the world, as its ad market will only expand by 6%. Germany abundantly exports automobiles to China and imports raw materials from Russia and Ukraine.
Nevertheless, Germany’s ad industry stagnation appears only temporary. “They’re slowing down, but not falling off a cliff,” said Létang. “There’s resilience.”
ADVERTISING MARKET KEEPS GROWING THROUGH ECONOMIC UNCERTAINTY
KEY TAKEAWAYS
The summer update of MAGNA’s “Global Ad Forecast” predicts media owners advertising revenues will grow by +9% in 2022 to $816 billion. They will grow by +6% in 2023.
After a strong start of the year (U.S. 1Q22 +14%), advertising spending will be slowing down amidst economic uncertainty (US +8% over 2Q-4Q), but organic and cyclical growth factors will support marketing activity and advertising demand.
Digital advertising sales will grow by +13% this year to reach 65% of total ad sales. Digital Video will be the fastest-growing ad format (+16%) followed by Search (+15%), and Social (+11%).
The advertising revenues of traditional media companies will grow in most media: Television and Audio (both +4%), Out-of-Home (+10%), while Print advertising will decline slightly (-3%).
Traditional media companies are deriving a growing percentage of advertising revenues from digital formats (AVOD, CTV, audio streaming, podcasting, etc). In some markets these are already contributing 10% of ad revenues in TV, 20% in audio media, and 50% in publishing, stabilizing revenues for publishers.
Television advertising suffers from rapid erosion of linear viewing, offset by growing AVOD revenues, strong pricing in the first half, and extra spending around cyclical events (mid-terms, Olympics, FIFA World Cup).
The U.S. ad market will grow above average (+11% to $326 billion) as it is relatively insulated from the economic consequences of the Ukraine war and is boosted by record political advertising ($7bn this year).
The second largest ad market, China (15% of global advertising revenues), will grow below average (+8%) due to endemic difficulties (stricter regulatory environment for digital media, severe COVID lockdowns).
Among other top 15 advertising markets the strongest growth will come from India (+15%) and South Korea (+11%) while Germany (+6%) and Italy (+3%) will suffer the most from the post-Ukraine economic environment.
Vincent Létang, EVP, Global Market Research at MAGNA and author of the report, said:
“Most of the headwinds facing the advertising market this year were expected: economic landing following a red hot 2021, continued supply issues generating inflation, and mounting privacy restrictions slowing down the growth of digital ad formats. On top of that, the war In Ukraine now exacerbates inflation and economic uncertainty. Nevertheless, MAGNA believes full-year advertising revenues will grow again in 2022 at a healthy rate, helped by a strong start to the year, on top of organic and cyclical drivers.
Organic growth factors (continued and broad-based ecommerce spending, digital marketing adoption), strong cyclical drivers (record political spending in the U.S., Winter Olympics and FIFA World Cup), and the strength of emerging or recovering industry verticals (Travel, Entertainment, Betting, Technology) will generate enough marketing demand to offset headwinds and keep the advertising economy growing in full-year 2022.”
GLOBAL FORECAST: +9.2%
Globally, media owners’ advertising revenues will grow by +9.2% this year to nearly $828 billion i.e. 32% above the pre-COVID level of 2019. MAGNA was always expecting the global advertising market to slow down significantly in 2022 following the unprecedented levels of growth observed in 2021 (Global +23%, U.S. +26%) caused by a once-in-a-lifetime “planetary alignment” of factors: the V-shaped economic recovery and the marketing consequences of post-COVID lifestyles. Still, in its December 2021 update, MAGNA was expecting +12% for global, all-media advertising revenues in 2022. The reduction of our forecast from +12% to +9% is due to two main headwinds: a global economic slowdown since 2Q (full-year real GDP growth +3.6% according to IMF compared to +4.9% six months ago), and the mounting restrictions to data-driven targeting affecting digital advertising sales (e.g. the impact Apple iOS changes have had on display and social ad formats).
Nevertheless +9% in 2022 would remain above pre-COVID growth rates (average 2015-2019: +7%). The economic slowdown will really start to affect ad markets in 2Q and 3Q and MAGNA anticipates lower growth over the period 2Q-4Q, as well as throughout 2023. Nevertheless, the full-year 2022 forecast downgrade would have been much steeper if not for a stronger-than-expected first quarter recorded in most markets (+14% in the U.S.). Growth expectations would also be lower if not for the strong cyclical factors of 2022: the U.S. mid-term election (bringing almost $7 billion to local TV stations and digital media), and two global sports events: the Beijing Winter Olympics and FIFA World Cup (Qatar, November). Without cyclical ad dollars, television revenue growth would be below +2% instead of growing by +4% this year.
Offsetting the effect of a weaker economic environment, organic drivers continue to fuel marketing activity and advertising spending. Among these: the competition between brands to gain leadership in new, fast-growing product verticals driven by lifestyle or regulatory changes (e.g. sports betting, food apps, direct-to-consumer disrupters), and the growing adoption of digital advertising by both local businesses and consumer brands, often at the expense of “below-the-line” marketing channels. Most industry verticals are expected to stabilize or increase ad spend this year. Travel, Entertainment, Betting, and Technology are expected to grow the most, while Automotive and CPG/FMCG budgets may be under pressure due to supply chain and cost issues.
Around an average growth rate of +9%, MAGNA anticipates North America to grow the most (+11%) followed by LATAM (+10%), APAC (+8%) and EMEA (+7.5%).
The EMEA economy and ad markets will slow down more than other regions in 2022 because of the impact of the Ukraine war on trade and energy costs and energy supply (40% of natural gas consumed in Western Europe comes from Russia). Additional headwinds include supply chain issues and the slowdown in Chinese imports, hurting manufacturing industries, typically in Germany, or the food and luxury industries in France or Italy. In April 2022, the IMF published real GDP forecasts between +2% and +3% for most of Europe (with Spain and UK slightly higher), i.e., 1 to 2% below the IMF forecasts in October 2021, and significantly below the global average (estimated at +3.6% at the time). Finally, most European economies and ad markets are mature, with all consumer brands and many SMBs already using the full palette of advertising formats, including digital formats and programmatic technologies. Marketing activity and ad spending are therefore more vulnerable to economic slowdown than in emerging regions that are driven by organic growth in media usage and marketing usage. The U.S. ad market (40% of the global advertising revenues) will grow above average (+11% to $326 billion) as it is relatively insulated from the economic consequences of the Ukraine war and boosted by record political advertising. The second largest ad market, China (15% of global advertising revenues) will grow below average (+8%) due to endemic headwinds: a stricter and less predictable regulatory environment for digital media giants, and severe COVID lockdowns under the “zero COVID” policy. Among other top 15 advertising markets the strongest growth forecast are India (+15%) and South Korea (+11%) while Germany and Sweden (both +6%), and Italy (+3%), will suffer the most in the post-Ukraine war economic environment.
OUTLOOK BY MEDIA: THE DIGITAL LANDING
Advertising revenues of traditional media owners (TV, radio, OOH, print, cinema) will grow by +4% to $282 billion i.e. 94% of the pre-COVID market size (2019). Out-of-home will perform best with advertising revenues growing by +10% to $30 billion (already 93% of 2019 levels), followed by Audio and Television (both +4%) and Publishing (-3%). Without cyclical ad dollars, traditional media revenues would grow by just+2% instead of +4% this year. Traditional media companies are deriving a growing share of their ad revenues from digital formats (AVOD, streaming, podcasting…): in some markets these are already contributing to 10% of total TV ad sakes, 20% in audio, 50% in publishing.
Television continues to suffer from erosion of linear reach and viewing: -5% to -15% per year among adults under 50. -5% per year for the entire population. This is however offset by three drivers: (1) growing AVOD revenues (+10% to +15% this year), (2) double-digit inflation in cost-per-thousand pricing so far this year, and (3) incremental ad spend around cyclical events (mid-terms and Winter Olympics in the US, FIFA World Cup). Without cyclical dollars, television ad sales would grow by +1.6% this year, instead of +3.9%.
OOH is expected to grow by double-digits for the second year (2021: +12%, 2022: +10%, following a -25% decline in 2020) which brings it close to the pre-COVID market levels. MAGNA anticipates OOH to complete the “COVID recovery” as early as this year in the U.S., although it will take one or two more years at a global level. The OOH medium benefits from the recovery of consumer spending, and a positive industry exposure (Entertainment, Betting, Travel). The OOH industry is also reaping the benefits of its investment in technology and innovation over the last ten years; as digital OOH units reach critical mass (25% of total OOH ad sales) and omnichannel programmatic platforms can now include connected OOH screens in cross-media campaigns, OOH can tap into new and more vertical opportunities (CPG, Pharma, Retail).
Revenues from digital advertising formats (search, social, video, banners, digital audio) will reach $534 billion this year (+13%). Digital formats now represent 65% of total advertising sales worldwide. Search will remain the largest advertising format ($265 billion), ahead of Social (+11% to $158 billion), while Digital Video formats will be the most dynamic (+16% to $68 billion). All the same long-term drivers of digital advertising spending growth are in place, with consumers streaming more, spending online via ecommerce channels, and engaging with more digital media while working from home. However, there are also new headwinds, including broader economic and inflationary pressure, as well as the impact of Apple’s iOS privacy changes and impending future data collection changes that are offsetting some of that organic strength. As a result, the mix of digital spending will shift slightly in 2022 and beyond, away from social media and towards keyword formats and other campaign strategies that can directly attribute advertising spending to sales.
Digital video will be the most dynamic format in 2022 (+16% to $68 billion), reflecting the continued shift of viewing away from linear TV and towards on-demand, addressable platforms (mobile devices and, increasingly, connected TV). Long-form VOD has been mostly subscription-centric for the first ten years, but as SVOD subscription are approaching saturation, big SVOD players like Disney+ and Netflix are considering introducing cheaper, ad-supported tiers, which would bring more ad budget into digital video looking forward. Search will remain robust (+15% to $265 billion) as consumers continue to spend online, and because keyword formats are insulated from data privacy headwinds. Social media advertising sales will strongly decelerate this year to the slowest pace on record: +11% to $158 billion. This abrupt slowdown reflects difficulties attributing social platform spending to consumer purchases outside the social network walled gardens. Social’s mild slowdown will persist until in-app social commerce products are rolled out to again provide social campaigns with perfect visibility on consumer purchases.
Programmatic technologies, and audience targeting in general, remains the growth engine of many digital formats; programmatic advertising will continue to evolve as the privacy landscape matures. Changes in the data landscape moves budget from one digital format to another rather than away from digital campaigns entirely. Despite digital advertising’s slowdown in 2022, digital (and digital OOH) is still growing faster than every other format, as data and targeting help brands provide a more impactful advertising experience for consumers.
WHY SOCIAL ADVERTISING IS SUDDENLY STRUGGLING
MAGNA was always expecting social media advertising to decelerate in 2022 following explosive growth in 2021 (+36%). In the December 2021 update, MAGNA was predicting +18% in 2022 (half the growth of 2021). In this update we downgrade the 2020 growth forecast by seven percentage points to +11% – i.e. more than any other ad format. This is because social ad formats are hit by a combination of headwinds, with the last two in the list below being endemic/specific to the social ad format.
Client saturation. In advanced mature markets, the social media budgets of consumer brands have reached a scale where any further growth comes under more financial scrutiny and becomes more vulnerable to current or anticipated business outlook. In 2020-21, millions of small businesses kick-started social media marketing during and after COVID. This is still happening in 2022, but at a slower pace.
Audience saturation. Reach and time spent with social apps are nearly saturated in all advanced markets (Western World, China), and advertising growth in 2021 was almost entirely driven by pricing rather than volume. The plateauing in usage and ad impressions is increasingly clear this year, and incumbent players have reported declines in some mature markets.
Targeting Restrictions: Since Mid-2021 the new Apple policy allowed millions of social media app users to opt out from sharing their device IDs and therefore prevented them from being targeted based on their data. Furthermore, it was difficult to tell what products users exposed to social media campaigns were purchasing because of that advertising spending. The impact was gradual: it started to visibly affect attractiveness and ad sales around the end of 2021, particularly for Meta and Snap.
As a result, in a social media market that is growing by only +10% or less for the time being, the rise of TikTok (already 10% market share in the U.S.) is an additional headwind for incumbent social platforms. Past a difficult 2022, when ad sales must compare with a 2021 year that was still mostly without targeting limitations, the market should stabilize or recover some strength. Additional privacy measures may come from Apple and Google in 2023 (nothing as detrimental as iOS14) but social media players will introduce other ways to become attractive again e.g. in-app social commerce, partnership with retail media networks etc.
U.S. FORECAST: +11.1% TO $326 BILLION
In the U.S., Media Owners Advertising Revenue are expected to grow by 11.1% this year, to reach a new all-time high at $326 billion dollars (40% of the global advertising market), including political.
This is only slightly below MAGNA’s previous expectations for 2022 (+12.6% in March, +11.5% in December). MAGNA reduced its growth forecasts for 2Q22 to 4Q22 due to the economic slowdown, but that is partially offset by the stronger-than-expected market performance recorded in 1Q22 (+14%) and an increased forecast for political spending (now +51%).
Cross platform video advertising will grow by +8% to $89 billion as the slowdown of national linear TV (-4% to $38.6 billion) will be offset by long-form AVOD (+22% to $9.0 billion), short-form pure players (+19% to $19.5 billion) and local TV benefitting from record political spend (+19% to $23.4 billion). Cross-platform audio advertising (broadcast radio, audio streaming and podcasting) will grow by +5.7% to $16.8 billion while cross-platform publishing ad sales will shrink by -3% to $16.2 billion.
OOH sales will gain +16% to $8.5bn and surpass its 2019 pre- COVID high in 2019, one year ahead of previous expectations. Direct Mail will also benefit from political campaigns and revenues will grow by +2.6% to $17.6 billion.
Pure play digital media advertising sales (search and social media) grew by just +16% year-over-year to $42.5bn, in the first quarter of 2022, as the slowdown continues from 3Q21 (+44% yoy) and 4Q21 (+19%). Social media sales slowed to +8% in the quarter (compared to +38% in 2021) as an update in privacy restrictions set by Apple has significantly reduced growth. Conversely, search advertising remained strong in the first quarter, at +24% to $25.5bn, as interest from advertisers has shifted from social media to search in the wake of the privacy change by Apple. For the full year 2022, pure play digital advertising sales will still grow by +14% to $195bn. Search will lead performance at +18% to reach $116.7 billion, while social media will grow to $67 billion (+11%).
In terms of industry verticals, Entertainment and Travel will be among the main drivers for advertising spending growth in 2022. Both are finally recovering from a protracted COVID hangover as blockbusters and movie-goers meet in theaters again, and consumers are travelling again for pleasure or business. The streaming war may ignite again as Disney+ (this year) and Netflix (possibly next year) may launch game changing AVOD tiers. Sports Betting is becoming a major category; until local and digital media have captured the bulk of the spending, but national TV will increase its share as it is legalized in ever more states (New York this year, California and Texas possibly in 2023).
On the other hand, CPG categories (Food, Drinks, Personal Care, Off-the-Counter Pharma) may stagnate or decrease ad budgets this year. Retail sales were strong in the first four months, but supply issues and high inflation on commodities are pushing up the price of CPG products and hurting sales. The $5-a-gallon gasoline is having a disproportionate effect on the discretionary consumption of low-income families, forcing them to shop away from premium brands in CPG, tech and fashion. Automotive ad spend will likely not recover yet, as the lack of car inventory continues to be a major damp on ad budgets, only partly offset by the high-funnel campaigns for electric vehicles or online sales apps.
One bright spot however is, as usual, political advertising. Nearly $8 billion was raised by candidates and PACs, by the end April 2022, which was +85% higher than in the previous midterm cycle in 2018. As a result, MAGNA increases its forecast for full-year incremental political advertising revenues: the additional ad dollars will reach $6.7 billion this year (+51% over the 2018 tally).
Local broadcast stations local addressable ad formats (local cable, CTV) will get two thirds of the political bonanza (around $4 billion) while the third will mostly benefit pure-play digital ad formats: short-form video will reach half a billion dollars (+230% vs 2018), while social media will grow by +165%. For the first time political advertisings will account for 1% to 2% of total advertising revenues for social and video media this year.
TABLE 1: US ADVERTISING REVENUES
Source: MAGNA Ad Forecasts, June 2022. CE=Cyclical Events (Elections, Olympics, FIFA World Cup). PREV= Previous US MAGNA update (March 2022)
TABLE 2: GLOBAL ADVERTISING REVENUES
Source: MAGNA Ad Forecasts, June 2022. PREV= Previous Global MAGNA update (December 2021)
ABOUT THE RESEARCH
The MAGNA research is media centric. It monitors net media owners advertising revenues based on a bottom-up analysis of financial reports and data from media trade organizations; other ad market studies are based on tracking ad insertions or consolidating agency billings. The MAGNA approach provides the most accurate and comprehensive picture of the market as it captures total net media owners’ ad revenues coming from national consumer brands’ spending as well as small, local, “direct” advertisers. Forecasts are based on economic outlook and market shares dynamic. The full report contains more granular media breakdowns and forecasts to 2025, for 70 markets.
Next Global Forecast: December 2022 – Next US Forecast: September 2022.
ABOUT MAGNA
MAGNA is the leading global media investment and intelligence company. Our trusted insights, proprietary trials offerings, industry-leading negotiation and unparalleled consultative solutions deliver an actionable marketplace advantage for our clients and subscribers.
We are a team of experts driven by results, integrity and inquisitiveness. We operate across five key competencies, supporting clients and cross-functional teams through partnership, education, accountability, connectivity and enablement. For more information, please visit our website: https://magnaglobal.com/and follow us on LinkedIn and Twitter.
MAGNA has set the industry standard for more than 60 years by predicting the future of media value. We publish more than 40 reports per year on audience trends, media spend and market demand as well as ad effectiveness.
To access full reports and databases or to learn more about our market research services, contact [email protected].
