The Russian invasion of Ukraine will be a slight drag on U.S. advertising growth in 2022, media investment and intelligence company Magna said on Monday.
It reduced its advertising spending growth expectation for the current year from 12.6 percent to 11.5 percent “due to the economic and geopolitical uncertainty,” which also led it to predict “lower-than-expected economic activity, continued supply issues and protracted inflation. But Magna said that “media owners’ ad revenues should still grow … this year to pass the $300 billion milestone” for the first time. Its projection for the year is $320 billion.
“The Ukraine crisis has already hit consumer and business confidence,” said Vincent Létang, executive vp global market intelligence at Magna. “It will slow down economic growth in 2022 and fuel the inflationary trend. It is too early to assess the depth and length of economic repercussions, but Magna believes the U.S. economy is strong enough to weather this new challenge.”
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He added: “Looking at marketing and advertising, the macro-economic headwind will be mitigated by continued organic drivers (innovation, emerging verticals, e-commerce) and stronger-than-expected political fundraising (leading to at least $6 billion in incremental ad spend).”
Magna also updated its 2021 U.S. ad estimates. “Advertising revenues grew by a record 25 percent to reach $287 billion,” the firm said in a report. “As expected, the pace of growth continued to slow in the fourth quarter: +14 percent year-over-year compared to +26 percent in the third quarter and +46 percent in the second quarter. All media types benefited from the strong economic environment and spending recovery, notably search (+42 percent), social (+36 percent), audio (+24 percent) and video (+12 percent).”
For 2022, despite “the geopolitical crisis,” the company noted that “organic growth drivers remain strong, and mid-term elections will bring $6.2 billion in incremental ad revenues.” This would mark a 41 percent increase over the 2018 election cycle, up from the company’s previous forecast for a 31 percent gain. Noting that $5.7 billion was raised by February according to the Federal Election Commission, up 72 percent compared with the same stage of election year 2018, Magna predicted that local television could get $4.2 billion in political ad revenue, up 26 percent over 2018, while direct mail could reach $600 million and digital media “close to $1.5 billion.”
Technology, telecom, entertainment, travel and betting are among the industries expected to grow advertising spending the most in 2022, “while automotive continues to struggle with supply issues,” Magna said. “Most media types will grow advertising revenues again: search (+17 percent), social (+16 percent), out-of-home (+11 percent) and cross-platform video (+8 percent).”
