Published on Cynopsis Media
This is MAGNA’s fifth revision upward since its initial projection of 7.3% in June 2023. What forces in the media have caused the increasing optimistic outlook?
More than a year ago, we were expecting 2024 ad sales, including cyclical, to grow by +7.3%. Since then, due to better-than-expected economic environment and stronger-than-expected ad spend so far this year, which is based on the ad revenues reported by media companies in financial reports, we now expect +11.4% growth.
In spring 2023 the macro-economic outlook for 2024 was still pretty dire. Inflation was still high and digital media was struggling with the transition to native vertical video formats that were not yet fully monetized. As the economic outlook gradually improved, ad spend accelerated and we gradually adjusted our growth forecast.
What do you think is prompting brands to increase their investment? Which sectors are seeing the biggest upswing?
We are seeing strong spending from sectors including:
· Automotive with competition for leadership in EVs, despite car sales slowing down this year
· CPG companies are reallocating their marketing budgets toward retail media opportunities and Olympic sponsorships, and the sector is relaxing as the high inflation episode is ending
· Technology companies see improvement in revenues and profitability this year and are increasingly comfortable promoting their AI brands, e.g., Gemini, Copilot etc.
Another driver for brands is the coming of age of ad-funded streaming. With Amazon introducing advertising on Prime Video earlier this year, the scale and targeting opportunities for premium streaming has never been better. Some brands are re-allocating TV budgets towards streaming; however, many are in fact increasing their premium video budgets in both linear and streaming. This allows them to benefit from offerings that now combine scale, addressability, and safety. Ad-funded streaming will be one of the fastest-growing ad formats this year, at +19%.
How can media companies compete for dollars?
Media companies can focus on content, e.g., streaming platforms investing massively in sports now, or in ad innovation (data-driven ad product, interactive ads with QR codes etc.) or both, of course. Another big strategic component that companies can leverage is partnerships with retailers to capitalize on retail media opportunities. Media companies, particularly digital players, can also stay ahead of the curve and compete for ad dollars by integrating AI into their campaign creation process. AI integration (e.g., Gemini for Google, Llama for Meta) is helping new and existing advertisers more easily create, streamline, and optimize their advertising campaigns, which is also leading to higher conversion rates. While the platforms like Google and Meta, which capture the lion’s share of advertising dollars for many reasons including the amount of first party data they have, are also seeing higher ad prices.
