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The U.S. advertising market will “nearly stabilize” in the second half of the year with a 2 percent decline “as the economy reopens, consumption resumes and political ad spend piles up” to hit a record, according to Magna, the research arm of advertising giant Interpublic Group.
The company on Wednesday predicted that this would lead to a full-year ad decline of 4.6 percent to $213 billion.
“In 2021, Magna expects advertising sales to rebound, posting a gain of 4.0 percent (5.4 percent excluding cyclical events),” a summary of its report said. “However, with a total of $222 billion, the U.S. ad market will still be slightly smaller than it was in 2019 at nearly $224 billion.”
The firm forecasts next year’s rebound to be “driven by a recovery in consumption and mobility, and the return of normal event schedules (new shows, domestic sports, Olympics).” And it expects seven of the top 10 industries “to regrow ad budgets in 2021, but automotive and retail will continue to struggle.”
Magna highlighted that first-half 2020 advertising sales decreased by 7.2 percent “as resilience in digital media advertising sales (+5.7 percent) mitigated heavy declines in linear media (-23.1 percent),” which saw a “historic decline.”
Raising its 2020 election cycle forecast, the firm now expects political ad spending will hit $5.1 billion, an increase of 32 percent compared with 2016 and an all-time high. “Fundraising and ad spend turned out even stronger than expected in the first half despite the COVID recession,” Magna explained. “Record political ad spend will mitigate local TV losses and pump close to $1 billion into digital media for the first time, three times the amount of 2016.”
A Wall Street analyst recently also argued that election season was on track to bring in record political advertising spending, with big broadcast TV station groups, such as Nexstar, Gray and Tegna, among the key beneficiaries.
“The COVID crisis has hastened the normal end of the economic cycle and brought on the worst recession ever,” said Magna’s Vincent Letang, executive vp, global market intelligence. “The sheer size of digital advertising in 2020 (approximately 55 percent of the U.S. ad market) and its resilience in this economic environment explains the relatively modest decline Magna forecasts for the whole year despite the severity of the economic recession, compared to the double-digit decline 2008-09 (12 percent) when digital media was still nascent.”
Added Letang: “For linear media, however, 2020 remains brutal, but Magna is confident that ad revenues will stabilize and recover in 2021.”
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