Dive Brief:

• Insider Intelligence cut its global ad spending growth forecast for this year by 6%, reflecting enduring macroeconomic challenges and headwinds to leading social media platforms, according to details shared in an email with Marketing Dive.   
• The researcher in the first quarter predicted the digital sector would climb 15.6% year-on-year to $602.3 billion in 2022 but has tempered expectations. It foresees just 8.6% growth to reach a $567.5 billion total on the year. 
• While not all platforms are affected evenly, the breakout of the digital pie proportionally remains relatively unchanged. Twitter, which was never a leader, will likely take the hardest hit as it faces a bumpy transition to new owner Elon Musk, a firebrand who’s done little to assuage jittery marketers in his first few weeks at the helm. 

Dive Insight:

Insider Intelligence’s updated outlook captures just how rocky 2022 has been for the digital ads sector. At the year’s outset, industry tea leaf readers were expecting a relatively positive run, albeit one not reaching the historic rebound seen in 2021, when marketers bounced back from the pandemic fallow period. Then the Ukraine war happened, followed by soaring inflation and a sharper pinch felt from privacy changes implemented by Apple that have forced social media firms to rework their advertising infrastructure to rely on less data.

With fears a recession will take shape early in 2023, the long-term picture is dimmer. In Q1, Insider Intelligence predicted that digital ad spending at the global level would hit $756.5 billion by 2024, but that figure has now dropped to around $696 billion.

If digital prospects across the board remain uncertain, Twitter appears to be in particularly dire straits. Insider Intelligence foresees the app growing less than 5% to $4.7 billion this year, and reduced its outlook for the ads business by 39.1% over the next two years, resulting in essentially flat growth.  

Twitter was already in a rough spot before the Musk takeover, grappling with slowing demand, a weak track record on innovation and the same iOS challenges roiling social media at large. Musk, since stepping up as owner, has immediately driven away the types of blue-chip advertisers he needs to hold onto by sharing misinformation and holding a generally combative attitude. The company has at the same time lost key executives, including its CMO and global ad sales lead, who served as an important bridge to the marketing community. 

Mondelez International this week confirmed it was pausing its Twitter activity, citing hate speech problems that have been significantly amplified following the deal’s close. Other firms that have confirmed freezes include General Motors, General Mills and Audi. 

“Musk’s attempts to keep advertisers happy have been futile,” said Jasmine Enberg, principal analyst at Insider Intelligence, in the research note. “Advertisers are pulling their ads due to brand safety concerns, as well as potential conflicts of interest with Musk’s other businesses. 

“Musk’s management style won’t help motivate employees or comfort advertisers,” added Enberg. “Many of the employees who could have soothed advertisers’ concerns are now gone.”

Other platforms in crisis include Meta, the owner of Facebook and Instagram, which is in the middle of a costly bet to build the metaverse as its core ad-seg revenue drivers wane. Insider Intelligence expects the company’s worldwide ad business will drop for the first time in 2022. The report estimated Meta will generate $112.7 billion in digital ad revenue this year, down 2% YoY, while its 2024 growth trajectory dipped nearly 20%. Meta today confirmed extensive layoffs as it tries to tighten its belt. 

Even players faring comparatively well are feeling pressures amid the downturn. TikTok, a Gen Z favorite, has quickly evolved from an experimental play into a “must-buy for many advertisers,” according to Enberg. Insider Intelligence still downgraded its projections for the video-sharing app 21.6% from its Q1 targets. A slower pace of growth will see the ByteDance-owned site generate $18.5 billion in global ad revenues by 2024. Given its Chinese ownership, TikTok is open to unique regulatory scrutiny compared to competitors, including calls to outright ban the service in the U.S. 

Google search meanwhile could be more “insulated” from some issues hammering social, per Insider Intelligence. Amazon has also experienced a healthier rate of growth for its ad sales segment when measured against digital peers. Insider Intelligence pegged the business as jumping 21.9% to reach roughly $38 billion in 2022 and around $56 billion by 2024. 

“Amazon’s ad business will take a haircut alongside the other ad platforms, but its fast-growing retail media network will be among the most resilient to macro headwinds,” said Andrew Lipsman, principal analyst at Insider Intelligence, in a statement attached to the report.