Outlook for Ad-Spending Market in 2024: A Blended Projection

Article Brief:

The latest projections from WPP’s GroupM and Interpublic Group’s Magna indicate that despite difficult economic and geopolitical conditions, global ad spending is forecasted to end 2023 with a positive outlook.

GroupM forecasts that global ad revenues will increase by 5.8% this year to reach $889 billion, excluding the effects of U.S. political advertising. The growth is expected to slightly slow down to 5.3% in 2024. On the other hand, Magna predicts that ad revenues will rise by 5.5% this year to reach $853 billion, and then surge by 7.2% in 2024.

Both media investment agencies have recognized the strengths of pure-play digital channels, which are media platforms that are not an extension of traditional formats like TV or out-of-home. Additionally, they have noted that consumer habits are increasingly influenced by algorithms, suggesting that brand strategies may need to focus more on shared experiences.

Article Insight:

The global advertising market appears to be maintaining a steady course as the final months of 2023 approach, a shift from a turbulent first half and a promising indication for CMOs strategizing for the upcoming year. Nevertheless, marketers are expected to proceed with caution in the coming months due to ongoing conflicts such as the Israel-Hamas war, and heightened political tensions, creating a delicate situation with consumers.

Magna predicts that the easing of inflationary pressures and the return of major cyclical events such as the Olympics and a U.S. presidential election will lead to a 7.2% increase in ad revenues, reaching $914 billion in 2024. Traditional media owners, who experienced a period of decreasing revenues by 4%, will benefit from the recovery as brands seek mass reach and contextual relevance in these environments.

The IPG-owned media investment arm forecasts that pure-play digital, including social apps like TikTok and retail media networks, will see a 10.5% increase in ad sales, reaching $587 billion in 2023, accounting for 69% of all ad sales. The company predicts that digital pure-play will see a 9.4% increase in 2024.

GroupM offered a more cautious assessment due to excluding some political ad spend impacts. WPP's prediction is that the digital pure-play category will see 9.2% growth in 2023, followed by a slower 7.3% growth in 2024.

The globalization of brand marketing has been advantageous for platforms that offer scale and has contributed to consolidating power. According to GroupM, the top five global ad sellers experienced a 25.4% compound annual growth rate from 2016 to 2022. Additionally, Magna reported that nearly half (49%) of global ad revenues are generated by just three platforms.

The growing digital sophistication and personalized marketing, with content and ads increasingly tailored by algorithms, have created a fragmented lifestyle for many consumers. This shift may lead brands to focus more on in-person, shared experiences, boosting the sports and events spaces, according to GroupM. Meanwhile, across the industry, players will be emphasizing "artificial intelligence" in products and services, similar to digital, to keep pace with AI software like ChatGPT.

While the two media-buying agencies occasionally differed in their expectations, they were in agreement about some clear winners. Retail media networks, for example, are expected to perform well. GroupM forecasts that the channel, while still the smallest segment in its digital analysis, will generate $119.4 billion in 2023 and expand those earnings by 8.3% next year. Magna, on the other hand, suggested that retail media will represent $124 billion in global ad revenues in 2023, or roughly 15% of the overall market. According to Magna, eighty-seven percent of retail media dollars are flowing toward keyword search-based formats. Outside of China, retail media now makes up nearly a quarter (23%) of total search advertising.

The Connected TV market will help boost the struggling TV sector, as more streaming services are incorporating traditional commercials to increase profits. Amazon Prime Video's addition of an ad-supported tier in January is expected to revolutionize the ad-supported video-on-demand industry, according to Magna.