Why GroupM is optimistic about the global ad market amid fears of an impending recession

For the second year in a row, GroupM predicts that despite the tumultuous economic and geopolitical situations around the world, the global ad industry will see robust growth this year.

The WPP agency released its optimistic global mid-year forecast today, anticipating an 8.4% increase in global advertising revenue, excluding U.S. political advertising, in 2022. The projection is down from the agency's December 2021 forecast, which anticipated 9.7% growth in 2022.

Despite the prevalent fear of an impending recession, GroupM does not foresee a perilous economic state ahead, citing encouraging factors including low unemployment levels, historically-low interest rates in the recent past, and the continuation of the industry’s unprecedented growth since 2021.

“Recession should not be the base-case expectation for how the economy will evolve,” said Brian Wieser, global president, business intelligence for GroupM. It's “less growth than we might have forecasted a few months ago, but not recession. Deceleration, not decline.”

There has been “a growing disconnect” between the global economy and the ad industry, Wieser added. New businesses mushroomed during the pandemic, which led to high levels of advertising intensity. “Over time, the correlations have weakened between economic activity and advertising,” Weiser explained.

This year's growth projection is not nearly as stellar as the unprecedented 22.5% growth of global ad revenue in 2021. But such a drop in growth is expected, given 2021 was a recovery year from the beginning of the pandemic, with the industry bouncing back from the 3.1% decrease in ad revenue in 2020.

Marketers have recently slowed down the rate at which they have increased their media budgets and fewer new marketers have emerged this year, GroupM observed.

The drop in GroupM’s forecast for 2022’s global ad revenue growth correlates with China’s recent policy changes that diminish the expansion of its domestic ad industry. In a GroupM press briefing, Kate Scott-Dawkins, global director, business intelligence, GroupM, listed numerous new Chinese regulations that have hindered the growth of ad revenue. “There were the Data Security Law and the Personal Information Protection Law,” she said, “And then there are some other uniquely Chinese policies'' that went into effect in 2021, including the regulations that “diminish celebrity fan culture,” “restrictions on the time spent by minors on video games” and the crackdown of the academic tutoring industry.

China, the world’s second-largest ad market, represented 20% of global advertising in 2021. The country is affected by policy changes, pandemic-related lockdowns, and supply chain bottlenecks. GroupM now expects China’s ad industry to grow by 3.3% this year, down from its 10.2% prediction in December.

Publicis’ Zenith lowered its global 2022 ad forecast last week, predicting 8% growth to $781 billion. It had predicted a 9.1% increase in December. That agency cited the war in Ukraine as one of the biggest pressures on the ad market. 

Digital, tv and out-of-home

According to GroupM, Digital ad revenue of pure-play digital platforms is expected to grow 12% in 2022, an expected slowdown in growth from its 32% surge in 2021. When accounting for the digital offshoots of traditional media companies, digital advertising is expected to account for $617 billion in ad revenue this year, which is 73% of the total.

Within the digital ad sector, retail media and e-commerce are projected to grow more quickly.

While TV advertising has become less effective, leading marketers to explore more digitally-focused strategies, the growth in connected TV and global nature of streaming platforms are buoying the medium. TV ad revenue is slated to grow by 4.3% globally in 2022, with CTV expected to grow 24% to hit $21 billion by the end of this year.

The out-of-home ad market is expected to grow 12% in 2022 but is still not expected to hit its pre-pandemic levels until 2024, indicating that the space is still in recovery mode.