March 2024: New US Ad Forecast Through 2028
New US Advertising Forecast Released: 8.0% Ex-Political Growth Anticipated in 1Q24, 5.6% in FY2024
During an understandably slow first half of a week prior to a long weekend for many around the world, only one significant company in the advertising world reported earnings - S4 Capital - and even their numbers weren’t overly surprising given a pre-release in January and widely known weakness in spending trends from their core customer base of “digital endemics”, which I wrote about earlier this month. My take on S4’s results can be found here.
But the big piece of work I published on Monday was an updated forecast of US advertising trends on a quarterly basis through the end of 2028. Most immediately, I raised my expectations for the quarter and year ahead based upon what was learned about the advertising economy during the past few months and what those learnings tell us about the future. My expectations for the advertising industry for 1Q24 now call for expansion of 8.0% excluding political advertising, and for the full year 2024 I expect 5.6% ex-political growth. In my prior forecast I expected 1Q24 growth of 7.0% and full year expansion of 5.2% on a comparable basis.
To explain why I’m more positive about the market than I was before, future economic expectations – which I already viewed positively throughout 2022 and 2023 – have improved noticeably. GDP forecasts for 2024 in real terms were up by nearly a percentage point in February vs. November in the Philadelphia Federal Reserve’s most recent Survey of Professional Forecasters’ release) with implied nominal GDP expectations approaching 5% for 2024 vs. closer to 4% previously.
Looking beyond 2024, with forecasts of 4-5% over subsequent years in nominal terms, presuming personal consumption expenditures (which historically correlate more strongly with advertising than GDP) grow by a similar amount, a 4-5% baseline continues to feel like the right starting point through 2028.
At the same time, there is a “double-edged sword” of opportunity and risk associated with cross-border advertising from the Chinese export market which could either help or hurt the ad market in 2024 and beyond. There is a significant volume of incremental spending flowing into the United States from manufacturers of consumer goods based in China who capitalize on a global treaty supporting under-priced shipping costs for many physical products. Paired with an absence of tariffs for inexpensive goods, perhaps 5-10% of all advertising in the United States depends at least in part on stable relations between the world’s two biggest economic powers. Such an outcome is far from assured over the next several years, let alone the current one.
Because many of these advertisers are relatively high intensity (meaning: they spend a greater share of their revenue than their non-export-based competitors on advertising). Consequently, as they take market share, they contribute to elevated levels of advertising spending and therefore to faster industry growth.
Similarly, e-commerce-based retailers – regardless of their domicile – are typically four times more ad-intense than physical retailers; online travel agencies are more ad-intense than traditional agencies; digital game publishers are more ad-intense than traditional game manufacturers, etc. As ad-intense competitors across the economy take share from those who are not, growth rates have the potential to remain above the mid-single digit level for several years to come. Still, on balance it continues to appear that a mid-single digit growth expectation for underlying advertising growth remains as a realistic starting point for longer-term expectations for the advertising industry.
On a more immediate basis, to the extent that the easy comparables of the fourth quarter of 2022 provided a good chunk of the “lay-up” for the massive growth we anticipated for the fourth quarter of 2023 – which grew by 11.1% excluding political advertising, ahead of my 9.0% forecast – something like that should be evident in the first quarter of 2024 as well. 1Q23 wasn’t a lot better than 4Q22, with both periods representing a time when advertiser sentiment was particularly (and unnecessarily) negative leading to overly restrained spending from many marketers on a temporary basis. Of course, some of that softness was due to the difficult comparables those quarters faced with 4Q21 and 1Q22, respectively.
Still, it feels like 1Q24 shouldn’t be dramatically slower than 4Q23, and so I am increasing my expectations for growth on an ex-political basis to the aforementioned level of 8.0% for the first quarter. Given the healthy economic conditions likely to play out for the rest of the year, I boost the full year number slightly to 5.6% as noted above.
The full written note can be found here, and quarterly data sets for each quarter and dozens of media formats from 2017 through 2018 are available upon request from paid subscribers and advisory clients.
Press coverage with additional insight and commentary can be found at Ad Age, AdExchanger, Inside Radio, Mediapost, RBR and VideoWeek among other outlets.