Magna’s full-year projection is 2.3 percentage points, or $10 billion in ad revenue, stronger than its previous forecast in December
As the U.S. gets back on track following a disastrous 2020, so will the country’s advertising industry. Total ad revenues will rise by billions of dollars, and most marketing channels will stabilize to, or grow above, their pre-pandemic normals, the latest Magna Advertising Forecast predicts.
Buoyed by a long-term decline in COVID-19 cases, President Biden’s trillion-dollar stimulus package, and a return to regular sports programming, the advertising industry’s total 2021 revenues are set to increase 6.4% to $240 billion, according to Magna’s new report, released today. That outlook is 2.3 percentage points stronger than the company projected in its previous forecast from December 2020.
Excluding one-off spending surrounding events such as last year’s political cycle and the upcoming Summer Olympics in Tokyo, the normalized growth rate for ad revenues this year would be even more significant at 8.6%.
“We were always predicting the overall decline of the U.S. market would be moderate,” says the report’s author Vincent Letang, executive VP, global market intelligence at Magna. Not every forecaster was so optimistic at this time last year, he says, but the market eventually proved to be “even more resilient than we thought.”
Total ad spend inclusive of cyclical events is simultaneously poised to jump this year by an average of 7.25%; broken down by fiscal quarter, the year-over-year increases may be as high as 15% in Q2 this year against historically sparse spending in 2020, and as low as 2% in Q4, thanks to last year’s major political and holiday spending.
This year’s strongest ad spending will come from verticals such as travel, automotive, drinks and entertainment—categories that saw sweeping ad budget cuts last year as consumer demand all but disappeared in the wake of the coronavirus pandemic. Other verticals’ spending growth may not be as robust through 2021, but the silver lining is that few, if any, categories will see a decline this year, Letang says.
There is one exception to the rule, though. “One vertical that may not grow very much would be, in my opinion, retail,” he says, citing the industry’s reliance on foundational brick-and-mortar stores, despite an e-commerce boom.
In the 12 months since the pandemic became severe in the U.S., everything from groceries to prescription drugs to luxury goods has adapted to a world of online shopping, which may hinder consumers’ swift return to normal. “We’ve had a record number of store closures. It might continue despite the economic recovery,” Letang says.
Nearly all ad formats will also see stabilization or growth this year relative to pre-pandemic levels. Social, digital video, search and out-of-home media should all anticipate double-digit growth in 2021, while national TV and radio are in for more sluggish single-digit increases.
For the first time, digital formats will account for at least two-thirds of all ad sales, growing 13% to $161 billion this year. The “big three” digital players—Google, Facebook and Amazon—have been outperforming themselves in terms of ad revenues, recording 17% growth in 2020 to now capture 82% of the market share. Social and search ads account for roughly two-thirds of the digital ad market in 2021, Letang adds.
He credits the current market’s recovery speed to the prominence of digital advertising, which had less than 20% market share of ad revenues a decade ago, and has seen such major gains that it has supplemented linear advertising’s shaky rebound. Much of that growth can be chalked up to a recent embracing of digital marketing by small mom-and-pop businesses, which Letang calls a “matter of survival” for them.
An upswing of rapid growth carried by digital media means the ad market’s recovery time will be just a fraction of what it was during the Great Recession; in fact, total U.S. advertising only posted an actual decrease for one quarter since the outbreak of COVID-19, versus an industry-wide decline across nine consecutive quarters from 2007 to 2009.
The industry’s resilience wouldn’t be possible without 2020’s record-setting political ad spend, which topped $8 billion amid a bitter fight for the presidency and partisan control of Congress. And while total revenues were up 75% compared to the 2016 political cycle, a surge in pandemic-related e-commerce and American businesses adopting digital marketing strategies also deserve some of the credit, the report states.
Unsurprisingly, another boon this year will be the Olympics, which Magna has assumed are proceeding as scheduled for the purposes of its new forecast. The international sporting event will net between $800 million and $900 million for national TV ad revenues this year, by Letang’s estimation, who notes an unprecedented Olympic double-whammy: Six months after the Closing Ceremony in Tokyo, the 2022 Winter Olympics will be in full swing in Beijing.