Madison and Wall: Saturday Summary
For the week ending June 16, 2023
Below is a summary of some of key data points and ideas from my regular publications during the past week:
US Agency Revenue Forecast And Industry Overview. As the week ahead features the annual Cannes Lions festival, I thought it important to complete a new analysis of the advertising agency industry. Although I’ve always been positively oriented around the durability and growth opportunities facing the agency sector over the years (although not blindly so) even I was surprised by how much more positive my view has become after attempting to quantify the size and trajectory of the business beyond the holding companies. While there is lots of room to debate future growth trends, I now believe that any assessment of the US advertising agency industry that doesn’t recognize the business has been doing well – holding companies and independents combined grew revenues by nearly 5% on average each year over the last 20– is incorrect.
Source: Madison and Wall, US Census, Company reports
US Retail Sales Up 2.8% in May 2023, Related Ad Spend Likely Up More. Retail sales are not as critical to the economy as services, but they are an important category of advertising, representing around 20% of all spending despite only accounting for around 15% of all turnover among businesses of all kinds. To the extent that there are read-throughs on the economy from the data, during May of this year, in the US spending on cars, restaurants and bars are holding up very well, growing by high single digits year-over-year while food and beverage, home improvement stores and building supply stores’ sales grew by only low single digits.
Google's Ad Tech Business Faces More Pressure As EC Issues Statement of Objections. Meanwhile, in Europe (where expectations for May’s retail sales data according to Refinitiv-tracked consensus will be -3.0%, although this figure excludes automotive sales as well as food services), the biggest news impacting the advertising industry related to the European Commission’s issuance of a Statement of Objections to Google. Pressure to force a break-up of the ad tech business is coming from multiple jurisdictions, and in this note I review some scenarios and outcomes that might follow.