U.S. Advertising Forecast – Fall Update (September 2021): Advertising Recovery in Full Swing

After advertising spending grew by +32% in the first half, MAGNA has raised its media owner ad revenue forecasts to +23% in 2021, and +12% in 2022 when the U.S. market reaches the $300 billion mark for the first time.

 

KEY FINDINGS

  • Boosted by economic recovery, advertising spending grew by +32% year-over-year in the first half of 2021 to reach $130 billion.
  • All major industry verticals grew ad spending in the first half, with automotive, finance, restaurants and retail showing the largest growth vs. 2020 (+50% or more).
  • As a result, the advertising revenues of traditional media owners (incl. long-form video, audio, publishing, OOH) grew by +11% year-over-year while pure-play digital ad formats (incl. search, social, short-form video, digital audio) expanded by +49%.
  • Cross-platform video advertising format sales grew by +20% while audio ad formats grew +29%.
  • Driven by continued economic strength, Olympic spend, and recovery from some lagging verticals in the second half, full-year ad spend will reach $278 billion this year (+23% vs 2020).
  • At the end of 2021, the “COVID Recovery Index” for ad spending will reach 124 overall (24% above pre-COVID levels): index 91 for traditional media owners, index 158 for digital pure players.
  • Looking at spending verticals, only four (auto, travel, restaurants, personal care) will remain under index 100 at end-2021 but they will all catch up to pre-COVID levels in 2022.
  • A return to normal business conditions for all verticals, a robust macro-economic outlook, and the mid-term election boost will fuel double-digit growth again in 2022: +12%, to reach the $300 billion mark for the first time.

 

According to Vincent Letang (EVP, Global Market Intelligence at MAGNA): The unprecedented growth in advertising spending in the first half (+32%) was more than low comps due to the COVID lockdown and recession last year. It was caused by a unique combination of national brands reconnecting with consumers and competing for a limited amount of traditional media inventory, while the lasting changes of COVID on lifestyles and marketing methods continue to fuel huge digital advertising spending from both big brands and small businesses. These ongoing organic growth engines, combined with Olympic budgets and the Mid-Term election spending, will continue to generate double-digit spending growth in the second half and into 2022.

THE ADVERTISING ROLLER-COASTER

With 50 years of data and correlations tracking ad spending and the economy, MAGNA has long established the link between advertising spending and the economic environment: media budgets (higher-funnel media formats) rise and fall faster than any other economic or business indicator and amplify short-term fluctuations. At the same time, pure-play “direct” digital formats (search, social media) continue to benefit from organic growth in adoption by marketers and consumers and the acceleration of e-commerce. Together, these factors explained the resilience of spend in the U.S. in 2020 (digital pure-play growth of +16% nearly offsetting traditional media sales decline of -14%). The same factors explain the soaring rebound in 2021 so far, with the economy performing above expectations and marketing activity recovering even faster than the economy, with only a couple of media channels or industry verticals lagging behind.

The economic recovery (full-year real GDP forecast +6%, personal consumption +12.5%), is causing a surge of marketing activity in most industry verticals, fueling an acceleration in advertising spending and media owners’ revenues, above and beyond expectations. Based on MAGNA’s analysis of media owners’ advertising revenues, ad sales totaled $130bn in the first half of 2021, a record growth of +32% against the same period in 2020. Advertising sales were up +16% year-over-year in the first quarter, and growth accelerated +50% in 2Q21 due to the historically weak comp in 2Q20.

All media types benefitted from the ad spend recovery in the first half to various degrees. The cross-platform ad sales of traditional media owners were slower to recover initially but grew by +11% over Jan-June (1Q: -8% yoy, 2Q +36%). Meanwhile, digital pure players ad sales showed explosive growth: +49% to $81.5bn (1Q21: +38%, 2Q21: +60%). Looking at the top 10 industry verticals, all of them increased ad spending compared to 2020. Advertising spending growth was above average for automotive (+56%), finance/insurance (+50%), restaurants (+50%) and technology (+45%). Because their businesses have been slower to recover, entertainment and travel showed below-average growth so far: +8% and +32% respectively. MAGNA anticipates triple-digit growth for travel and entertainment in the second half as Americans start travelling again and delayed blockbusters are released in movie theaters. Conversely some verticals may slow down ad spend growth in the second half as they face rampant supply issues, e.g. automotive.

FIRST HALF 2021: TRADITIONAL MEDIA OWNERS RECORD +11% IN CROSS-PLATFORM AD SALES

Video Media advertising (holistic, cross platform ad sales, all video formats) grew by +20% in the first half with all segments showing significant recovery against 2020. Broadcast and cable’s national ad sales were up +10%, local stations and local cable sales were up +13%, CTV/OTT/AVOD ad sales (including full episode players like Hulu) grew by +41% and digital video pure players (including YouTube and Twitch) expanded by +68%.

Audio Media ad sales (from traditional radio broadcasters and pure players, including broadcast radio, audio streaming and podcasting) grew by +29% against a weak first half in 2020.

Publishing ad sales (newspaper and magazine brands, paper and digital) were flat (+1%), which is better than the long-term trend (approx. -10% per year), mostly thanks to digital ad sales that now represent more than half publisher’s ad revenues. Out of home ad sales were slow to recover as consumer mobility remained below normal in several regions and segments (airports, public transports) throughout the first half. But growth in other segments (roadside billboards, street furniture) stabilized total ad sales at around $3.4 billion (+2% yoy). According to the Apple Consumer Mobility Index, Driving Mobility stood at index 160 in June (100=Jan 2020) while Transit Mobility was still lagging in June (index 93), but it accelerated to 116 by mid-September.

DIGITAL PURE PLAYERS CONTINUE TO BENEFIT FROM EXPLOSIVE ADVERTISING GROWTH: +49%

Based on financial reports, MAGNA estimates that the advertising revenues of digital pure players (search, social, video, digital audio, banners, programmatic) grew by +49% to $81.5bn in the first half. 2Q21 sales grew by +60% yoy (+17% qoq) following a growth of +38% in 1Q21. All digital formats have benefitted from a rapid acceleration in digital marketing from both large consumer brands and – even more so – even small businesses (many of them starting digital marketing in the aftermath of the COVID crisis). As a result, search and social media ad sales grew by +49% each in the first half (to $44.9bn and $27.4bn resp.) while digital audio pure play (streaming and podcasting) grew by +51% and digital video pure play by +68%.

While ad sales grew by a similar amount within all three major digital segments, growth drivers are quite different by format. For search, half the growth comes from growing usage (queries and clicks) and pricing (cost per click up approx. 20%); for pure-play, short-form digital video formats, usage and views were essentially flat and pricing was the main driver; finally for social media formats, usage is plateauing, and growth is fueled by ad load increases and the continued shift to more valuable and costly ad formats (such as stories). The fact that inflation – vs. cheap rates a year ago – is the main driver of digital dollars this year, rather than volume, suggests that growth rates will slow down in the second half of 2021, and in 2022.

2021 FULL YEAR FORECAST RAISED TO +23%

Following stronger-than-expected ad spend across the board in the first half and looking at a strong economic outlook in the second half, MAGNA raises its full-year ad revenue forecast. With the additional booster of Summer Olympics in 3Q, further mobility recovery and holiday sales in 4Q21, media owners’ advertising revenues will reach $278 billion this year, +23% vs 2020. Adjusting for cyclical effects (incremental Olympic ad spend but very little political ad spend vs 2020) the normalized growth reaches +26%.

As a result, MAGNA anticipates that at the end of 2021, the U.S. ad market COVID Recovery Index will stand at 124 (i.e. 24% more spend than pre-COVID all-time highs of 2019.) Most, but not all, media types have fully recovered in just one year. Traditional media owners’ ad revenues will stand at index 91 (100=2019), long-form video media (incl. national and local TV) at index 98. OOH will stand at index 87 and cinema media at just 31, as most theaters remained closed for many months in 2021.

2022: DOUBLE-DIGIT GROWTH TO COMPLETE COVID RECOVERY

Following this V-shaped recovery in 2021, growth rates are bound to slow down somewhat in 2022, but MAGNA still anticipates double-digit growth, bringing the market above the $300 billion mark for the first time. COVID vaccination has reached 64% but new cases have risen back to 150,000 per day due to the circulation of the more contagious Delta variant in a population that is gradually returning to a normal lifestyle. However, the effectiveness of existing vaccines against variants suggests that local authorities and employers will continue to incentivize or mandate vaccination rather than implement new restrictions to business and mobility that would hamper economic recovery.

In a year that should finally be entirely free of COVID-restrictions, without any remaining supply issues (affecting industries such as auto) or capacity issues (affecting travel, restaurants, theaters and local businesses), economic growth and consumption will remain strong and all industry verticals will finally catch up with pre-COVID levels of ad spend. Adding the incremental revenues generated by winter Olympics ($700 million) and political advertising around the Mid-Terms (close to $6 billion), media owners’ advertising revenues will grow by +12% to reach $310bn.

Again, most media industries should benefit from the sustained demand: video (+9%), audio (+6%), OOH (+11%), search (+16%) and social (+17%).

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The MAGNA methodology focuses on the analysis on actual advertising revenues from all media owners, enabling MAGNA to gain visibility on ad spend and ad sales from all advertisers – large and small, local and national – as well as every media type.

Next MAGNA ad forecast update (U.S.+Global): December 2021.

MAGNA ADVERTISING FORECAST

KEY DATA (SEPT. 2021)

 
US Advertising Forecast Figure 1
 
US Ad Forecast Figure 2

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U.S. AD SPENDING IS ON A TEAR AND WILL KEEP GROWING IN 2022: MAGNA FORECAST

By E.J. Schultz, Published by AdAge
 

The IPG firm predicts spending to break the $300 billion barrier next year, helped by Olympics and midterm elections

 

U.S. ad spending will surge by 23% this year to $278 billion and maintain a healthy clip of 12% growth in 2022, surpassing $300 billion for the first time with nearly all major industries returning to pre-COVID marketing investment levels, according to a new forecast.

But the report from Interpublic Group of Cos.’ Magna comes with a caveat: It assumes that supply constraints affecting multiple industries won’t worsen and that COVID restrictions that have held back sectors such as travel, restaurants and theaters will continue to ease.

Ad sellers can thank the winter Olympics and midterm elections for boosting their 2022 prospects, contributing an expected $700 million and nearly $6 billion in ad spending respectively, according to the forecast, which projects 2022 total spending to reach $310 billion. The improving economy led Magna to increase the 2021 protection from the 15% growth it forecast in June.

“The unprecedented growth in advertising spending in the first half (+32%) was more than low comps due to the COVID lockdown and recession last year,” Vincent Letang, Magna’s executive VP for global market intelligence, states in the report. “It was caused by a unique combination of national brands reconnecting with consumers and competing for a limited amount of traditional media inventory, while the lasting changes of COVID on lifestyles and marketing methods continue to fuel huge digital advertising spending from both big brands and small businesses.”

While consumer demand remains strong, brands are now contending with COVID-related supply issues, shipping cost increases and labor shortages that are prompting some marketers to curtail holiday ad spending plans, as Ad Age reported last week. The auto industry has been hard hit by a scarcity of microchips used in car parts that is forcing brands and dealers to re-evaluate ad spending on sales events, including holiday-themed promotions.

The supply situation is one reason Magna is projecting automotive spending will remain below pre-COVID levels in 2021, but the firm expects it to recover in 2022. “In the first half [of 2021] auto spending was quite dynamic but we suspect it is going to be more subdued in the second half. It will still grow year-over-year compared to the COVID year, but it will slow down,” Letang said in an interview.

But overall, Letang does not expect supply issues in other industries to result in a significant ad spending cutback. “In the big picture, I don’t think it’s going to dampen the recovery that much—only for some verticals and for the media formats that rely on those verticals,” he said.

Impact on local TV

He pointed to local TV as one sector that could be hurt by the auto pullback. But TV stations will also benefit from political spending related to midterm elections.

Local broadcast and cable TV spending is the only media sector that Magna projects will end 2021 with negative growth (down 4.7%). Total video spending—which includes digital video and OTT—is forecast to grow 11.4% in 2021, led by pure-play digital sellers (such as YouTube and Twitch) that are expected to surge by 45.8%.

The forecast acknowledges the complications brought by the spread of the delta variant. “However, the effectiveness of existing vaccines against variants suggests that local authorities and employers will continue to incentivize or mandate vaccination rather than implement new restrictions to business and mobility that would hamper economic recovery,” states the report.

That gives Magna the confidence to project a rebound in ad spending in industries that have been particularly hard hit by COVID. The report estimates “triple-digit growth for travel and entertainment in the second half as Americans start traveling again and delayed blockbusters are released in movie theaters.”

As for more lockdowns, “if it hasn’t happened by now I don’t think it is likely to happen,” Letang says. “In this scenario, we assume there will be no further COVID disruptions to consumer mobility, consumption and business in 2022 at all.”

 
US Ad Forecast 2022
 

Read the full article in AdAge

Majority of consumers want control of their online ad load

By Patti Summerfield, Published by Media in Canada
 

Many internet users would prefer more control over ad delivery than the ability to block them, according to a new survey from UM, MAGNA and Brave.

 
When it comes to consumer attitudes toward online advertising, the majority (67%) feel bombarded by the number of ads, and more than half (60%) feel as if they’re continually being tracked by advertisers, according to a new study from UM, MAGNA and privacy browser Brave.
 
Rather than ad blocking, 79% of internet users say they would prefer to have more control over the content they receive. In addition, 72% feel online ads that are presented to them at a convenient time and separately from web content are just as preferred as no ads at all.
 
If they could control their online ad load, 81% of participants say they would consider using more adsupported websites without paying for content (66%), support brands they see ads from (61%), and even spend more time online (60%).
 
The study also found that 80% don’t trust online ads, 74% are not open to seeing online ads, and 74% hate online ads. Ad tracking is a big irritant: 70% find it creepy to see ads for products they’ve previously searched and 60% feel like they’re constantly being tracked.
 
In addition to gauging attitudes towards advertising and the value exchange, the research also included five ad effectiveness studies for brands American Express in Canada, as well as Canada Dry, Mini, Energizer and Simple Mobile in the U.S.
 
The brands found that between 61% to 74% of consumers interacted with their online ads when they were offered more control over ad load in a privacy safe environment. The advertisers also saw significant increases in key branding metrics including brand association (+15% – +17%), intent to research products online (+30%), and purchase intent (+9%).
 

Read the full article at Media in Canada

Consumers want control over ads served

By Sabrina Sanchez, Published by Campaign

A study by MAGNA and Brave shows consumers engage more with privacy protected ads.

 
Consumers aren’t interested in ad tracking — just look at the dismal opt-in rates on Apple’s iOS 14.5 update, which explicitly asks people if they want to be tracked by advertisers.
 
But they do engage with ads that appear in a privacy safe environment, according to a study released by MAGNA and privacy browser Brave.
 
The study, released on Thursday, shows that while most people, including Gen Z and Millennials, understand the role online ads play in enabling free content on the internet, the majority feel bombarded by the ad loads (67%), and 70% feel that ad tracking is creepy.
 
But that doesn’t mean people prefer to block ads completely. Of the survey’s more than 1,000 respondents, 79% preferred more control over ad blocking (73%) to completely blocking all ads. Additionally, 72% of people said online ads presented separately from web content at a convenient time were just as preferred as no ads at all.
 
The data shows privacy and greater consumer data control is good for marketers, not negative, despite industry wide concern over the loss of third-party cookies and mobile identifiers, said Kara Manatt, SVP of intelligence solutions at MAGNA.
 
“Advertisers [should] lean into these types of ad environments, because more and more people are going to be opting for them,” she said. “[They want] something in the middle — not having to pay for content and blocking all ads, but also not being constantly targeted or having a huge ad load.”
 
The study also evaluated ad effectiveness with five brands, including Energizer, American Express, Canada Dry, Mini and Simple Mobile, surveying more than 10,000 respondents. All five brands saw 61% to 74% engagement with their online ads when run in a Brave browser, which offers more control over ad load.
 
“When we asked people what they value about online advertising experiences, privacy protected ads and the option to control ads ranked the highest, followed by the desire to have ads that use a lot less of their personal data,” said Clayton Hartford, director of sales at Brave Software.
 
He added that users also want more control over which ads they see.
According to the survey, 66% of respondents would use more ad supported websites without paying for content if they had more control over ads, support brands they see ads from (61%), and even spend more time online (60%).
 

Read the full article at Campaign

CONSUMERS WANT CONTROL, NOT AD BLOCKING, IN ONLINE ADVERTISING

By Mike Juang, Published in AdAge

Audiences require value in exchange for seeing ads, new survey from Magna and Brave finds

 
Audiences want more control over the digital advertising they see, and want to get more in exchange for the ads they are shown, according to a new survey done by Interpublic Group’s Magna and the privacy-focused Brave web browser. While most people understand the role online ads play in supporting content, most say ads are too numerous–and too intrusive.
 
The results also painted a dire look at ad tracking, with 70% agreeing that it was creepy to see online ads for products previously searched and 60% feeling as though they were constantly being tracked by advertisers online.
 
“People feel completely bombarded with ads, and that’s been the main driver for negative ad sentiment,” said Kara Manatt, SVP of intelligent solutions at Magna. “They don’t want to feel trapped and want more control over their ad experiences.”
 
Most people don’t love or trust the ads they are served, with 80% saying they don’t trust online ads, 74% saying they are not open to seeing online ads, and 74% saying they hate online ads.
 
The intrusiveness of online advertising has become a heated topic in ad tech, and has led to action from lawmakers passing data regulation and privacy legislation, like Europe’s GDPR and California’s CCPA. The controversy has also led to companies like Google and Apple phasing out third-party cookies and identifiers, creating a rush within the advertising industry to find new ways to target ads without cookies.
 
But while the survey painted an unflattering portrait of digital ads and ad tracking methods, it also found that most audiences were not fundamentally opposed to online ads. 67% of Gen Z and 64% of Millennials agreed that online ads served an important purpose. (That number dropped to 61% within Gen X respondents and climbed to 65% of Boomers.)
 
According to the survey, the problem could lie in the value people were getting in return for being shown digital ads. 80% of respondents felt they didn’t get much in return for the online ads they saw, with 67% of respondents said there were too many ads on the internet and felt bombarded and 64% saying online ads interfered with their web experience.
 
But ad blocking is not the top go-to solution. 79% of survey respondents say the most appealing option would be to control the number of online ads they see daily, while 77% said they wanted online ads that are privacy protected. In comparison, 73% wanted a browser that blocks ads. The survey also found several popular solutions, like ads that tell a story, show previously searched products or letting audiences choose what brands served ads, were not as appealing or valuable to their ad experience as control and ads that don’t use personal data.
 
“We need to innovate, and for advertisers, they should be considering new and different ad environments,” says Manatt. Advertisers need to give consumers different options, or risk losing audiences to ad-free environments like Netflix, Disney+, and other SVOD services, she says. Not fixing the problem could destroy what little remaining trust there is between audiences and advertisers.
 
“There are two options: you see a lot of ads, you feel trapped, but you get free content. On the very opposite, there’s the Netflix paradigm. You are paying for great content but no ads,” says Manatt, who adds that people are not saying they want to block all ads. “I think the results show us there’s a need for options in the middle.”
 

The full study is available here.