“The global economy has recovered in-line with expectations and, in most markets, so has marketing activity and advertising spending.”
That’s the key finding from the December 2021 MAGNA Advertising Forecasts report. It shows that growth was particularly strong wherever COVID vaccination was fast and deep.
In fact, vaccination from the COVID-19 virus allowed full business re-opening early in the year. As such, U.S. ad spending grew by six percent in 2021.
By comparison, “underwhelming vaccination” and lingering COVID restrictions and/or manufacturing sector issues including supply-chain issues resulted in a 3.1% decline in ad spending in Germany. Indeed, a RBR+TVBR order made two weeks ago for Adele’s latest release on vinyl through a German retailer has been severely delayed because of such issues and a Deutsche Post slowdown tied to new quarantine restrictions in several German states.
But, the pandemic didn’t squelch spending, with more spending than ever in 2021 on a global level. As MAGNA sees it, consumers were using “the forced savings they built up in 2020 as soon as restrictions to mobility and shopping were relaxed in the spring or summer.”
In that environment, national brands and local businesses competed to be the first or the most effective in reconnecting with consumers. Ad spend also benefited from the added driver of rescheduled international sports events.
A $300 BILLION U.S. MARKET
Boosted by economic recovery, advertising sales grew by an estimated 25% this year to reach $284 billion.
The domestic ad market growth was slightly above the global average (24%). All major industry verticals increased ad spending by double digits, with technology (29%), retail (28%), entertainment (27%) and finance (25%) leading the way.
All media channels benefitted to a degree.
Cross-platform long-form video advertising sales grew by 6% to $66 billion. Of this, national ad sales increased by an estimated 10% to $47 billion. Broadcast/cable linear ad sales were up 7%, while long-form AVOD and OTT/CTV devices increased by 36%. Video pure players (short form video) increased 47% on the strength of YouTube and Twitch.
Perhaps the biggest conclusion of importance to broadcast media executives: Local TV and video ad sales fell 3% as local broadcast ad sales were off 5% without the tailwind to the record political spend in 2020. Cross platform audio ad sales rose 25% to $16 billion on the strength of digital audio and podcasting (68%).
A GLOBAL VIEW
Global all-media advertising spending grew by almost 22% to reach a new all-time high of $710 billion.
This 22% growth represents the highest growth rate ever recorded by MAGNA, beating 12.5% in 2000 and a significant increase from MAGNA’s previous global forecast of 14%, made in June 2021.
Again, the big growth is thanks to comparisons driven by the pandemic and lockdowns.
There were also “gigantic” government stimulus packages.
But, as MAGNA notes, “[While] 2021 was always expected to show record growth … this is growth in excess of recovery.”
The compounded advertising market growth between 2020 and 2021 was 9%. That’s higher than the average growth experienced during the four years before COVID-19 (+6% per year between 2016 and 2019). It shows that, on top of economic recovery and COVID control, several organic factors drove the tremendous acceleration of 2021.
For starters, linear ad format sales (TV and long-form video, radio, print, OOH, cinema) grew by 9% to reach $268 billion worldwide, regaining $21 billion of the $50 billion lost in 2020 (-17%). Global linear sales are thus back to 90% of pre-COVID (2019) levels. Most of the growth came from demand-driven inflation in media costs, rather than increased volumes, ad loads or impressions. Linear TV CPMs for instance, grew by an average 13% globally due to strong demand from many key industries (Retail, CPG/FMCG) and shrinking supply (linear viewing resumed its long-term decline following the COVID surge in 2020).
As a result, TV spending grew by 9% in 2021.
While mature linear ad formats recovered more or less in-line with the economy, digital ad formats proved once again that organic growth factors – beyond simple economic and marketing recovery – are “turbocharging” adoption and spending. Changes in lifestyles, media consumption, and business models continued to fuel an acceleration in digital marketing from national consumer brands as well as small, local and “direct” advertisers.
Digital growth from consumer brands comes partly at the expense of traditional linear channels, but in the case of small businesses (who represent the bulk of search and social ad spend and are growing much faster than big brands), it is almost entirely incremental money being added to the advertising pie. Digital advertising formats (search, social, video, banners, digital audio) grew by 31% to reach $442 billion or 146% of the pre-
COVID market size. Digital ad formats now account for 62% of total advertising sales worldwide. All digital ad formats grew by double-digits in 2021, led by digital video formats (long and short form) 37%, social media 34% and search 33%.
Pricing was also a key component to spending growth in 2021. Supply increased too
as digital video and social media continue to grow in reach and time spent, but this still was not enough to meet exploding demand, which led to double-digit inflation in CPM or CPC costs.
A GOOD YEAR FOR TV. A GREAT YEAR FOR RADIO
Television did well in 2021, with global ad sales reaching $168 million (9% and 98%
of the pre-COVID level) but radio was even stronger, although it had more ground to make up: 16% to 28 billion (89% of 2019 sales).
Print ad sales were flat around $43 billion but when adding back the digital ad sales of news and magazine publishers, total print-related ad sales were up approximately 10%. Finally, out-of-home media sales grew by 12% to $27 billion. The slower and more gradual recovery of OOH was expected due to the declines in consumer mobility, particularly in the heavily advertised transit segment, hurting OOH media audience and reach for most of 2021. OOH global ad sales stand at just 83% of their pre-COVID level at the end of 2021, but MAGNA is confident that ad sales will increase by double-digits again in 2022 and grow back to the 2019 level by 2023.
Looking forward to 2022, there are two potential threats to the global economy and the advertising marketplace: COVID and supply chain issues. These risks and headwinds are largely offset by the drivers on the horizon: strong economic growth (the IMF predicts 4.9%), further mobility recovery (especially for transit), continued organic digital growth fueled by e-commerce, and no less than three cyclical events generating incremental advertising spending (Winter Olympics, U.S. Mid-Term elections and FIFA World Cup).
MAGNA thus predicts the global advertising market to grow by +12% and reach $795 billion in 2022. Linear ad format growth will moderate to 4% (still a stronger performance than pre-COVID) while digital ad formats will grow by 17% and reach 65% of total ad sales.
In the U.S., MAGNA predicts advertising sales to grow by double digits again in 2022: 13% to $320 billion, as robust economic growth continues (3.9% real GDP growth, still faster than the long-term, pre-COVID trend of 2% to 2.5% per year) and two cyclical events
(Winter Olympics in February, and Mid-Term elections) will generate billions of incremental ad spend from brands and political groups.
National TV/video ad sales will be flat, as growth in long-form AVOD (Hulu, FEPs) and OTT/CTV platforms (29%) will offset a -5% decrease in broadcast/cable linear ad sales. Audio ad sales will grow 6% to $17 billion thanks to the continued growth in podcasting, and the return to normal life which will cause an increase in commuting and terrestrial radio listening.
Conversely, publishing ad sales will fall 1%, as digital growth, which will account
for 60% of publishing ad sales in 2022, of 10% will be offset by print declines of 15%.
