Dive Brief:

• Global advertising spending in 2023 is expected to grow 5.9% for a total of $874.5 billion, a figure that excludes U.S. political advertising projections, according to the latest full-year forecast from GroupM. 
• The WPP media agency painted an industry at an “inflection point” with pandemic trends cooling, digital leveling off and other levers of growth maturing. The firm said its underlying growth forecast over the next five years will be in the mid-single-digit range.    
• There are new uncertainties that could change the landscape, including the rapid rise of artificial intelligence (AI). GroupM expects AI to “inform,” or impact in some way, at least half of all advertising revenue by the end of this year, and cautioned that marketers must be deliberate with their bets on the tech.     

Dive Insight:

Six months into 2023, GroupM is holding firm with its full-year ad spending projections, reiterating a 5.9% growth figure from December. The upshot is that marketers should be prepared for a return to “some kind of normalcy” in the second half and looking ahead to 2024 despite shifting consumer habits and ongoing inflationary pressures, according to the agency. The International Monetary Fund believes the global inflation rate will drop to 7% in 2023.  

Pureplay digital ad revenue will tick up 8.4% to represent 68.8% of 2023’s total, according to GroupM, with that share estimated to expand to 74.4% by 2028. The firm noted that digital’s trajectory has cooled to a single-digit percentage rate, with the pandemic-driven boom tapering off. However, it suggested the slowdown is probably more a mark of the channel’s relative scale and maturity rather than a recessionary indicator. 

Beyond some leveling off, the advertising industry has undergone other changes since the end of 2022. ChatGPT has ushered in a wave of generative AI hype that has dominated headlines and become an investment driver in an otherwise sagging tech sector. AI is primed to reshape key pillars of the internet economy, including search and social advertising, bringing with it opportunities but also risks for brands. 

Generative AI’s emergence has buoyed interest in broader applications of automation in ad tech, creative and media. GroupM now foresees the AI craze touching at least half of all advertising revenue in some way by the year’s end. Agencies have positioned themselves as important strategic partners for clients trying to navigate where AI can practically benefit their business while avoiding pitfalls. 

“Advertisers in this environment will be well-served by having proactive guidelines and the right partners to navigate these waters so that choices in budget allocation and the use of AI are made intentionally with the long-term health of the business in mind,” GroupM stated in its report.

While the true impact of AI is still up for debate, other channels have further enshrined themselves in the everyday habits of consumers and advertisers. Connected TV (CVT) is expected by GroupM to add 10.4% in ad revenue between 2023 and 2028 on a compound annual basis. CTV revenue in 2023 will land at around $25.9 billion, a 13.2% year-over-year gain. 

Netflix and Disney have recently introduced ad-supported streaming tiers, while Amazon is reportedly mulling a similar option for Prime Video. Consumer spending on such subscriptions remains relatively small in major markets, which indicates that streaming platforms still have room to grow in this area, per GroupM. Meanwhile, global TV ad revenue will dip 1.2% to $133.6 billion in 2023, excluding U.S. political ad spending. 

Retail media also remains a magnet for brand budgets as verticals like consumer packaged goods try to link their campaigns closer to the point of sale and contend with the death of third-party cookies. The channel is the third fastest-growing behind CTV and out-of-home and will represent 14.4% of total advertising revenue in 2023.

Accurately gauging retail media growth can be tricky since few retailers are forthcoming with their ad sales. Still, GroupM foresees retail media revenue exceeding that of TV and CTV by 2028. The agency has recently updated its definition of retail media to encompass ad revenue from last-mile delivery services.