Global adspend to rise 8.3% this year but will slow in 2023

Global advertising spend will rise this year by 8.3percent – or $ 67.3bn – to $ 880.9bn, but will ease significantly in 2023 as investment is inhibited by cooling economic conditions and third- party cookie blocking online, says the World Advertising Research Center. Its projections, which are based on data from 100 advertising markets world- wide, amount to a reduction of almost $ 900bn in growth potential for the global advertising market for 2022 and 2023. Warc’s “Ad Spend Outlook 2022/ 23: Impacts of The Economic Slowdown” report says advertising holding companies, which serve many of the world’s biggest brands, recorded a positive start to 2022. Small to medium- sized businesses ( SMBs), on the other hand, are bearing the brunt of worsening economic conditions. A slowdownin SMB advertising activity will affect social media companies most. This sector is already struggling to grapple with the impact of Apple’s new privacy measures. Warc expects social media advertising spend to rise 11.5percent this year ( compared with + 47.1percent in 2021) and then to ease to just 5.2percent in 2023 – the slowest rate yet for the sector. Though consumers, particularly lowincome earners, are feeling the squeeze of soaring price inflation, Warc expects spending among high- income earners to remain bullish. Sectors like technology & electronics (+ 11.5percent in 2023), pharma & health care (+ 7.5percent) and household & domestic (+ 6.5percent) are expected to post healthy increases in advertising investment to capture any available disposable income.

Apple’s move to block third- party cookies across its 2- billion devices has already had an adverse effect on the social media companies that rely on third- party data, most notably Facebook parent company Meta. Warc predicts that Apple’s privacy push will remove close to $ 40bn from the bottom line of social media companies in the next 18 months, and says very few marketers are fully prepared for a post- cookie advertising market.

Warc believes Meta, which recorded its first annual decline in advertising income in the second quarter of 2022, will experience flat growth in the next 18 months. TikTok (+ 41.5percent), Snap (+ 5.8percent) and Twitter (+ 2.7percent) are all expected to record growth next year, but at a far slower rate than historically seen, while a number of Chinese platforms are set to record losses. With the exception of the automotive sector, all the product sectors monitored by Warc are expected to increase advertising spend this year. In 2023, four sectors are expected to cut spend – transport & tourism, alcoholic drinks, financial services and automotive. The technology & electronics sector is expected to lead this growth, followed by the pharma & health- care sector. Retail is forecast to increase advertising investment by 6.8percent this year and by 3.6percent next year, despite retailers experiencing tighter margins from inflationary pressures. Supply- and demand- side pressures will continue to constrain the automotive sector. Advertising spend in the video streaming sector is expected to grow faster than the total ad market this year (+ 8.4percent) and next year (+ 7.0percent), says Warc, adding that the advertising- funded video- on- demand sector – which includes Hulu, Amazon Prime Video and YouTube – is expected to rise 8.0percent this year and a further 7.6percent in 2023 to reach a value of almost $ 65bn. Privacy changes on Apple devices are also likely to affect YouTube. Warc predicts that YouTube’s advertising revenue will rise 7.3percent this year ( compared with 45.9percent in 2021), but that its growth will ease to 5.6percent in 2023. This would give the company 39.4percent of the global advertising- funded video- on- demand market, a declining share, as competition heats up with the introduction of advertising to Disney+ and Netflix later this year.