The winds of change often blow in unpredictable directions in the world of advertising, and as the saying goes, “The only constant in life is change.”
While some might have anticipated a looming advertising recession, the latest industry forecasts suggest that such fears might be exaggerated.
Brian Wieser, an industry analyst with a keen eye for trends, has released a new forecast that paints a picture of cautious optimism. According to Wieser, advertising investments are poised to grow by 5% this year.
Now, some might raise an eyebrow at the word “only” in front of 5%, considering the ad industry’s recent robust performance. After all, it’s a step down from the 6.5% growth recorded in the previous year. But let’s put it in perspective.
During the pandemic, the advertising landscape underwent a profound transformation. E-commerce surged, giving birth to a digital shopping frenzy. As a result, retail media investments and online direct-to-consumer sales soared. In this context, the ad industry basked in the glow of high growth. However, most savvy marketers and advertisers knew that such blistering growth rates were bound to be unsustainable over the long haul.
What’s more, the story doesn’t end with Wieser’s forecast. IPG Mediabrands’ Magna forecasting unit has decided to sweeten the pot by revising its growth outlook for U.S. advertising in 2023. They’ve bumped it up by one percentage point to a robust 5.2%. Looking further ahead, they’ve also revised their 2024 forecast upwards by six-tenths of a point to an even healthier 5.6%.
As Vincent Létang, Magna’s Executive Vice President of Global Marketing Intelligence, eloquently put it, “Six months ago, the media industry was bracing for recession, but advertisers kept calm and continued to support their brands and sales through media investment.” The key takeaway here is that advertisers didn’t hit the panic button; they understood that the industry’s health could withstand short-term fluctuations.
Létang’s narrative weaves a tale of recovery. After consecutive quarters of stagnation, the advertising industry began to bounce back, starting in the second quarter. And this resurgence isn’t some flash in the pan; it’s expected to gain momentum through the rest of the year. What fuels this rebound? It’s a cocktail of improved growth in the U.S. economy and more favorable year-over-year comparisons, especially when you consider the unique circumstances of the COVID-19 recovery.
But as with any story, there are nuances to consider. The ad recovery is a tale of two worlds. On one side, digital media is the shining star, outshining the rest. Digital retail media spending is on the rise, proving the digital realm’s resilience and potential for growth. On the other side of the coin, traditional media channels continue their decline, except for the stalwart out-of-home advertising sector.
As with any great narrative, there are subplots. While the advertising recovery blankets many sectors, a few, like consumer technology and finance, still find themselves in the grip of decline. But this is not a harbinger of doom; it’s part of the industry’s ebb and flow.
Now, as we step back from the advertising canvas, we can’t help but notice a broader economic picture emerging. Goldman Sachs, a financial institution known for its keen insights, has been revising its predictions with remarkable frequency. In the latest chapter of their forecast, they’ve slashed the chances of a U.S. recession within the next 12 months from 20% to a mere 15%. It’s a significant pivot, especially when you consider that just a few months ago, the odds of a recession stood at a daunting 35%.
The chief economist of Goldman Sachs, Jan Hatzius, has exuded confidence in the Federal Reserve’s bold approach. The Fed, in its 18-month campaign, raised interest rates from near-zero to 5.5%, a bold move that sent inflation tumbling from a worrisome 9% to a more manageable 3%.
So, what’s the takeaway from this narrative? The advertising industry, much like the broader economy, is a complex ecosystem. It experiences highs and lows, and it adapts to changing circumstances. The data suggests that we’re not on the brink of an advertising recession. Instead, we’re witnessing a recalibration, a return to a more sustainable level of growth—a growth that advertisers and marketers can navigate with confidence. It’s a story of resilience, adaptability, and cautious optimism, reminding us that in the world of advertising, as in life, change is the only constant.