U.S. ad spend to top $300 billion for the first time by year’s end, Magna predicts

The U.S. advertising industry is on track to surpass $300 billion in total ad spending for the first time ever, according to a new forecast from Interpublic Group of Cos.' Magna, which shows that nationwide ad revenues are poised to grow 9.8% year-over-year in 2022.

A driving force behind that performance is the trifecta of this year’s Winter Olympics, FIFA World Cup and U.S. midterm elections, which have collectively pumped billions of seasonal dollars into media owners’ coffers. Those events have also helped offset conditions that have caused many key verticals to scale down their marketing budgets in the second half of the year.

“We were always expecting growth rates to slow down after the historic highs of ’21,” said Vincent Létang, Magna’s executive VP for global market intelligence, who authored the report.

But, he added, with COVID restrictions mostly lifted in the U.S. and many of the supply chain-related issues that plagued the retail economy in 2021 finally getting resolved, Magna’s year-end figures have ended up “where we were expecting to be.”

In September 2021, the IPG-owned media agency suggested in its fall report that the U.S. would see ad spending maintain a healthy growth rate of 12% through this year, thanks in part to a number of high-yield cyclical events, with national spending set to surpass the $300 billion mark by the end of 2022.

Although that year-over-year growth trajectory has now shown itself to be slightly weaker than first thought—Magna now says total ad spend will be up just 9.8% compared to 2021 levels, or 8.1% when excluding cyclical events—the industry will nevertheless close out 2022 in its twelve-figure ballpark, with cumulative year-end spending in the U.S. projected to reach $323 billion.

That uptick closely mirrors the 9.2% growth rate the IPG firm predicted this summer for global advertising spending in 2022, which the media agency reckons will top $816 billion worldwide this year, even in the face of various economic obstacles, rising inflation and geopolitical instability in some regions of the world.

In terms of marketing channels, out-of-home has had an exceptionally banner year, particularly in the first six months of 2022, with its year-over-year growth topping 30% in that period.

“We were expecting out-of-home to recover, but it has recovered faster and more strongly than expected,” said Létang, noting that by the second quarter of this year, the medium had rebounded to its pre-COVID revenue levels. “Out-of-home is the only traditional media category that will achieve that feat that quickly,” he said.

On the flip side, social media ad sales have slowed dramatically from a robust 38% average during 2021 to as weak as -1% in the second quarter of this year, with mobile apps, in particular, suffering from Apple’s beefed-up privacy protections that have limited marketers’ access to key consumer data via iOS.

For the full year, Magna expects social revenues to be up just 4% in 2022, which Létang notes is weighted by the relatively strong performance of TikTok.

One-off events offer a major boost for media owners

“Obviously the strength of cyclical factors is unique to the U.S. market,” said Létang, who emphasized that there are few if any countries globally where sporting events and political elections “move the needle” like they do domestically. “The closest example internationally would be elections in India and Brazil, but it’s still not even close,” he said.

A top driver of that growth is November’s midterm elections, which will decide, among other things, which party takes or maintains control of the Senate and House of Representatives. Overall, Magna expects political spending to be up at least 63% versus the 2018 midterm election cycle, representing more than $7 billion in incremental revenue—roughly 70% of which will be concentrated in the second half of the year.

That influx of cash won’t be felt evenly across all media, but will be an exceptional boon for major political campaigns’ ad formats of choice such as digital media, direct mail and, above all else, local TV.

“Political advertising revenues will account for 25% of all revenues for local television this year,” said Létang, noting that station owners will see more than two-thirds of the $7.3 billion in political spend that Magna estimates for 2022.

Battleground states, in particular, are likely to see the lion’s share of that money, he said, with states including Arizona, Georgia and Pennsylvania each seeing hundreds of millions of dollars flood in across all media from both sides of the aisle, Ad Age’s Datacenter shows.

The midterms aren’t media owners’ only cause for celebration, though. Earlier this year, the Winter Olympics in Beijing brought in a healthy but somewhat subdued slew of advertisers for NBCUniversal, and in November, an atypically late FIFA World Cup in Qatar should do the same as the popularity of soccer continues to climb in the U.S.

Total spending is likely to wane next year

Understandably, citing a continued slowdown from last year’s post-pandemic ad spending boom and a lack of cyclical events like the Olympics or a major election, Magna’s forecast for 2023 is considerably more reserved.

Next year, the media agency is projecting growth of 4.8% in the U.S., down a full percentage point from the 5.8% it predicted in its previous report three months ago. “We don’t anticipate a decline, just a slowdown. We are confident some verticals will be driven by organic growth factors, mitigating the economic slowdown,” said Létang.

Chief among them is the automotive industry, which he admits is “a bit of a bet,” but assuming supply chain bottlenecks are remedied and Chinese factories resume semiconductor production, Létang is optimistic that “the car market in the U.S. might stabilize and grow” in 2023, especially considering consumers’ “pent-up demand” for new vehicles.

More of a sure thing are verticals including entertainment, travel and sports betting, which has been legalized in an increasing number of states in recent years and is on November’s ballot in a handful of others, including California, where a trio or organizations have spent at least $118 million to date to sway voters either for or against the initiative.

Also in for a windfall in 2023 are ad-supported video-on-demand services, with Netflix and Disney+ both announcing the introduction of ad-supported tiers in the coming months.

This year, AVOD revenues have increased an average of 22% year-over-year for platforms including Hulu, Peacock and Paramount+. But with the steaming wars’ two largest subscriber-supported players getting in on the AVOD action soon, Magna estimates that ad sales across all “long-form AVOD/CTV” platforms will be up a robust 33% in 2023.