U.S. Ad Growth to Slow Due to Russia-Ukraine War Says Magna – Ad Revenue to Exceed $300 Billion for First Time

Though the U.S. will experience a 1% drop, Magna expects revenue to reach $320 billion this year.

According to a new forecast from media investment and intelligence company Magna, U.S. ad spending will experience lower-than-expected gains this year as a result of Russia’s invasion and ongoing war with Ukraine.

Magna forecasts that media owners’ advertising revenues will rise by 11.5% this year, just below the 12.6% growth the company had previously forecast for this year. Magna did however say that revenue is forecast to reach $320 billion this year, which will mark the first time it has passed the $300 billion mark.

“The Ukraine crisis has already hit consumer and business confidence,” said Vincent Létang, EVP, Global Market Intelligence at Magna and author of the report.

 
 

“It will slow down economic growth in 2022 and fuel the inflationary trend. It is too early to assess the depth and length of economic repercussions, but Magna believes the U.S. economy is strong enough to weather this new challenge.”

Magna noted that political spending ahead of the midterms elections could offset the decline with revenue from political campaigns potentially reaching $6.2 billion this midterm cycle, which would be a 41% increase from the 2018 midterm elections.

In addition to political spending, ballot measures will bring millions of dollars into local and digital media, said Magna, adding, “Already 77 statewide ballot measures are scheduled for the November election, on various topics including abortion, marijuana, sports betting, environment and voting rights.”

 
 

National TV ad revenues will stabilize around -1%, while local TV ad revenues will grow by +16% in 2022, thanks to record political spending, and “despite the continued weakness of one key vertical, car dealers,” said Magna.

Search advertising sales are expected to grow by 17% this year, and social media ad sales will rise by 16% – a slower rate than the 27% gain last year.

Cross-Platform Audio advertising revenues will grow by +5%. Audio media “will also suffer from the continued weakness of the Automotive vertical”, said Magna but benefit from the recovery of consumer mobility and the growing adoption of digital audio.

OOH advertising revenues will grow by double-digits again (+11% to $8.2 billion), as consumer mobility recovery helps the Transit segment (+29%), which lagged Billboards and Street Furniture in 2021.

“During COVID (and despite a severe loss in revenues in 2020) OOH media owners have continued to invest in the conversion of premium locations to digital ad units, attracting new advertisers (Sports Betting, Finance, Streaming etc.) and generating additional revenues per location. Revenues from digital OOH units will reach 30% of total ad sales,” said Magna.

Key findings

Final 2021 estimates: US advertising revenues grew by a record +25% to reach $287 billion. As expected, the pace of growth continued to slow in the fourth quarter:

  • 14% YoY compared to +26% in 3Q21 and +46% in 2Q. All media types benefited from the strong economic environment and spending recovery, notably Search (+42%), Social (+36%), Audio (+24%) and Video (+12%).
  • For 2022, the geopolitical crisis leads MAGNA to anticipate lower-than-expected economic activity, continued supply issues and protracted inflation.
  • On the other hand, organic growth drivers remain strong and Mid-Term elections will bring $6.2 billion in incremental ad revenues (+41% vs 2018 cycle).
  • Overall, MAGNA reduces its 2022 growth forecast by one percentage point vs. pre-Ukraine expectations: media owners advertising revenues will grow by +11.5% to reach $320 billion, passing the $300 billion milestone for the first time (previous forecast +12.6%).
  • Technology, Telecoms, Entertainment, Travel and Betting are among the industries expected to grow advertising spending the most, while Automotive continues to struggle with supply issues.
  • Most media types will grow advertising revenues again: Search (+17%), Social (+16%), OOH (+11%) and Cross-Platform Video (+8%).

Magna will issue its next quarterly report in June.


Featured image: Andrae Ricketts via Unsplash

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