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In June, media investment and intelligence company Magna forecast a 15 percent increase in U.S. advertising spending this year to a record $259 million thanks to the economic recovery from the coronavirus pandemic. Now, it has boosted that projection to 23 percent to $277.6 billion after record growth of 32 percent during the first half of 2021 that came in stronger-than-expected across the board amid “a strong economic outlook.”
Magna also said on Monday that it has raised its estimated media owner ad revenue gain for 2022 to 12 percent “when the U.S. market reaches the $300 billion mark for the first time,” hitting nearly $311 billion.
Vincent Letang, executive vp global market intelligence at Magna, said: “The unprecedented growth in advertising spending in the first half was more than low comps due to the COVID lockdown and recession last year. It was caused by a unique combination of national brands reconnecting with consumers and competing for a limited amount of traditional media inventory, while the lasting changes of COVID on lifestyles and marketing methods continue to fuel huge digital advertising spending from both big brands and small businesses.”
He added: “These ongoing organic growth engines, combined with Olympic budgets and the midterm election spending, will continue to generate double-digit spending growth in the second half and into 2022.”
First-half ad revenue of traditional media grew by 11 percent over the same period of 2020, while pure-play digital ad formats expanded by 49 percent, according to Magna’s latest report. For the full year 2021, it predicts a 6.6 percent increase for traditional media and a 36.2 percent gain for digital media. However, local broadcast and cable TV will be the one category that will see ad spending drop this year, by 4.7 percent, its forecast noted.
Among the factors supporting strong ad spending in the second half of the current year are the recent Tokyo Summer Olympics and holiday sales in the fourth quarter, according to Magna. “Adjusting for cyclical effects (incremental Olympic ad spend but very little political ad spend versus 2020) the normalized growth reaches 26 percent” in 2021, the company said. “As a result, Magna anticipates that at the end of 2021, the U.S. ad market COVID Recovery Index will stand at 124 (i.e. 24 percent more spend than pre-COVID all-time highs of 2019).”
And Magna noted: “Most, but not all, media types have fully recovered in just one year. Traditional media owners’ ad revenues will stand at index 91 (with 2019 marking 100), longform video media, including national and local TV, at index 98, but cinema media at just 31, “as most theaters remained closed for many months in 2021.”
Following what the firm described as a V-shaped recovery in 2021, the ad spending growth rate is bound to “slow down somewhat” in 2022, Magna said. It added that despite the COVID Delta variant, “the effectiveness of existing vaccines against variants suggests that local authorities and employers will continue to incentivize or mandate vaccination rather than implement new restrictions to business and mobility that would hamper economic recovery.”
It concluded: “In a year that should finally be entirely free of COVID restrictions, without any remaining supply issues, affecting industries such as auto, or capacity issues (affecting travel, restaurants, theaters and local businesses), economic growth and consumption will remain strong and all industry verticals will finally catch up with pre-COVID levels of ad spend.”
With the revenue generated by next year’s Winter Olympics, which Magna pegs at $700 million, and political advertising around the midterm elections, estimated by the firm at close to $6 billion, “most media industries should benefit from the sustained demand,” the firm said.
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