Dive Brief:

• U.S. advertising revenues grew by 6%, excluding cyclical ad spend, to reach $315 billion 2022, but ad spend slowed significantly through the second half, with sales flat in the fourth quarter, per Magna's latest forecast.
• In 2023, macroeconomic uncertainty affecting the ad market will be mitigated by the rise of retail media, the growth of ad-supported video streaming and the auto industry's recovery, per the report.
• Magna expects ad revenues to increase by 3.4% (rather than 3.7% in previous forecasts) as the market reaches an all-time high of $326 billion, with digital advertising growing 9% and linear advertising declining by 4%.

Dive Insight:

The latest forecast from IPG Mediabrands agency Magna finds some bright spots for the ad market amid a macroeconomic climate that is causing anxiety for both brands and consumers. Mixed economic indicators — slow but continued GDP growth, receding inflation and a resilient job market — are being offset by the continued growth of emerging ad channels and the recovery of key verticals that will cause the market to grow, albeit at a slower pace.

“In a similar economic climate, ten or twenty years ago, the U.S. advertising market would almost certainly fall off a cliff. Things are different in 2023 because of media innovation fueling marketing demand," said Vincent Létang, executive vice president of global market research at Magna, who authored the report. "The organic drivers that boosted the ad market in 2021 and the first half of 2022 are still around and mitigating the impact of stressful economic signals."

Those organic drivers include the rise of retail media networks — an evolving space that has Magna expects to reach $41 billion in 2023 — and the continued growth of over-the-top streaming platforms that are increasingly ad-supported. The latter development, like the addition of an ad-supported tier to Netflix and increased consumer time on ad-supported video on demand platforms, has given brands cost-effective ways to reach audiences that had become difficult to reach through linear TV, according to Létang.

As for key industry verticals, automotive ad spend rebounded in the fourth quarter and will help buoy the market, as will the growth of travel and entertainment ad spending. However, CPG, restaurant and retail ad spend might struggle in 2023.

Continuing yearslong trends, digital advertising will grow while linear formats that are particularly vulnerable to economic effects will erode. In kind, growth in OTT ad sales will offset the decline of linear TV as the long-form video market stabilizes around $44 billion. Search and product search will remain the largest ad formats, growing by 10% to $125 billion.

Overall, Magna's forecast for 2023 is steady, with a small decrease to the growth rate, down from 3.7% to 3.4%. The agency expects little or no growth in the first half followed by a recovery in the second half. The next Magna ad forecast will be published in June.