Greetings from London and welcome to this first newsletter of 2023. 

At the end of 2022, we looked at what some of the ad industry luminaries were saying about the coming year ahead and what we should expect. 

I said then that in this first newsletter of 2023 we would examine what some of the “big guys” are also saying. By big guys I mean some of the big organisations that, at this time of year, put out their expectations, too. 

I have chosen three very different but influential bodies that for me, combined, represent a really good overall view of the ad industry coming from differing angles. 

The three companies I have chosen are: 

1. MAGNA, the leading global media investment and intelligence company. Famed in my opinion for trusted insights, industry-leading solutions, and actionable thought leadership. They publish more than 40 annual reports on audience trends, media spend, and market demand, as well as ad effectiveness. 
2. Deloitte’s Technology, Media, and Telecommunications (TMT) brings together one of the world’s largest groups of industry experts and is respected for helping shape some of the world’s most recognised TMT brands to thrive in a digital world. 
3. WARC (World Advertising Research Center) provides articles on advertising, marketing, brands, and campaigns. 

What are their views? Are there similarities? What insights can we glean?

MAGNA

The latest update of global media investment and intelligence company MAGNA’s “Global Ad Forecast” predicts media owners’ advertising revenues will reach US$833 billion in 2023, a 5% growth versus 2022 (US$795 billion), slowing from an increase of 7% in 2022 and 23% in 2021. 

After a strong start in 2022, advertising spending growth slowed significantly in the second half amidst global economic uncertainty.

However, full-year 2022 ad revenues still grew by almost 7% to US$795 billion, helped by record levels of cyclical spending, such as elections in Brazil and the United States, the Winter Olympics, and FIFA World Cup football. 

Vincent Létang, executive vice president of global market research at MAGNA and author of the above referenced report, said the advertising spending slowed down in the second half of 2022, but traditional editorial media managed to still grow by 2.5%. He suggests the long-term transition to a digital centric advertising landscape has slowed down following the COVID acceleration. 

But it’s not going away. 

Vincent said: “Marketers continue to value the brand safety that editorial media vendors deliver, combined with expanding cross-platform opportunities. The introduction of ad-supported premium streaming in 2023 and the continued success of digital audio formats also exemplify the comeback of ad-supported media in the top of mind of marketers, consumers, and media executives.”

So, will ad spend recover in 2023?  

Traditional media companies, such as news publishing, TV, and radio, saw their advertising revenues grow by 2.5% last year, despite the challenging economic environment, while digital media companies grew by 9%. Editorial media brands remain attractive and relevant as they now combine brand safety with cross-platform reach. 

In that environment, the ad sales of traditional media owners will slow, they say. Publishing sales will shrink by 3% and 4% respectively, while audio advertising will be stable (+1%). Meanwhile, digital advertising sales will grow by 8%, and 65% of total ad sales will be driven by organic growth factors, such as e-commerce and media consumption shifts.

Digital video will be the fastest-growing ad format (+11%) followed by search (+ 10%) and social recovering slightly (+7%).

Publishing ad sales suffer from privacy limitations 

Publishing advertising sales shrank by 3% in 2022 to US$47 billion. Both newspaper brands (-3%) and magazine brands (-4%) suffered as the growth in digital ad sales did not offset the long-term decline of print ad pages and revenues. 

Publishers’ digital ad sales have been hurt by the limitations in data collection and data-based targeting online in both the browser and the app environment since iOS 14. MAGNA predicts another decline of 3% for global publishing ad sales in 2023.

Search: recession proof 

Search will be recession-proof, privacy-proof. Keyword-based search advertising formats, including product search by e-commerce platforms, remain the largest advertising format with consumer brands and small businesses spending US$260 billion in 2022 globally.

While the growth of other digital ad formats slows due to data restrictions, search is driven by the continuing growth in e-commerce and retail media networks and was the fastest-growing ad format in 2022 (+13%). 

The percentage of search results leading to sponsored link clicks increased by 9% probably because an increasing proportion of searches are product or shopping searches. The same organic growth factors will generate an additional 10% in global search spend in 2023.

Social media: a range of influencing factors   

Social media ad sales are stalling under a “storm of headwinds” such as plateauing reach/usage, brand safety concerns, targeting limitations, and the rise of video snacking hurting both insertions and pricing — all combining to cause social media advertising revenue to stall in 2022. 

Global ad sales grew by just 4%, a far cry from the growth rates of 20% to 35% seen in the past three years. TikTok is the only social media owner to post advertising growth, while other social networks suffer flat or declining ad sales, especially in Europe and North America. MAGNA anticipates social media advertising to re-accelerate reasonably but not sensationally in 2023 (+7%). 

Digital video: one to keep an eye on? 

Digital video continues with robust growth. Digital video advertising will increase by 11% in 2023 to reach US$65 billion. This represents the second-fastest growth rate of all digital formats, slightly trailing search advertising. 

All components of the digital video landscape continue to grow, but short-form user generated content (YouTube, Twitch, and others) have seen slowing growth this year. ConnectedTV usage and streaming consumption continues to be a tailwind for long-form streaming growth, and 2022 has been no exception.

Digital concentration pauses from media owners:  

The digital media giants saw slower growth in 2022 than they have in recent years. Based on financial publications in the first three quarters, MAGNA expects the top three (Google, Meta, Alibaba) grew net advertising revenues by a combined 5% in 2022 compared to 41% increase in 2021. For example, they underperform overall market growth (+6.6%) for the first time ever, and their share of global ad sales paused at 42% after rising sharply and constantly in the last 15 years.

Meanwhile, other top-15 media owners— Amazon, Microsoft, and Apple — continued to enjoy double-digit stronger growth in 2022.

Deloitte’s Technology, Media, and Telecommunications (TMT)

Deloitte predicts that by mid-2023, all major video subscription services in Europe will have launched an ad-funded tier alongside ad-free offerings. Additionally, around two-thirds of consumers will use at least one advertising video-on-demand service monthly, a 5% increase on 2022. Further, they say that by 2030, most online video service subscriptions will be partially or wholly ad-funded.

The Virtual Reality market will generate global revenues of US$7 billion (almost £6 billion) in 2023, up 50% from US$4.7 billion in 2022. Deloitte predicts the number of actively in-use VR headsets worldwide will reach 22 million in 2023, almost 50% higher than that of mid-2022 but still a long way to go to create real impact. Immersive metaverse experiences can benefit from all this, of course.

Ads all over

Deloitte also predicts “ads all over” — advertising video-on-demand as a trend that will begin to spread far and wide in 2023. This is seen by many as a great way to target a chosen audience with relevant content as they tune in to watch high-quality content on a trusted platform. This premium advertising environment also allows advertisers to have a conversation with viewers without needing the budget of an on-air TV campaign.

E-commerce: a rising trend? 

Spending on goods and services via social media will surpass US$1 trillion (£820 billion) globally in 2023. This is a 25% increase year-on-year from 2022. It comes as a growing number of platforms are offering e-commerce services, whether it be via “content creators” or brands themselves. 

Consumers are turning to new forms of online shopping to find the best deals and the easiest transactions amidst increasing pressure on personal spending. Interesting to note that Deloitte research in 2022 showed that, in the UK for instance, 53% of Gen Z and 42% of Millennial consumers are influenced by social media personalities when making buying decisions.

WARC

Their overarching trends to look out for are largely influenced by the economic conditions we all find ourselves in right now. In the annual WARC report that identifies the most important market trends advertisers should focus on in the year ahead, they say most advertisers worldwide (95%) expect to be affected by the current economic recession.

Optimism at the start of last year faded fairly quickly as the Russian/Ukrainian war came to the fore. It has had a terrible impact on energy prices, inflation, and the cost of living. WARC reported: “The IMF is forecasting the weakest growth in 20 years, except for the global financial crisis and the worst phase of the COVID-19 pandemic.” 

WARC identified five main themes around what they expect to dominate this year: 

1. Advertising in a cost-of-living crisis: WARC says that while almost all marketers are concerned about the impact of the economic crisis, more respondents are planning to increase spend than last year, across both brand and performance. However, 36% are planning to cut marketing investment, despite evidence from prior downturns suggesting they should maintain spending levels.

This backs up what I reported in a previous newsletter that some advertisers may cut budgets, but few are stopping advertising totally. There is money to be had if we know where to look and approach those advertisers appropriately and creatively.

2. “Price vs. planet”: WARC describe what they see as a false dichotomy: 37% of companies expect to continue with their sustainability objectives despite the economic situation, while 35% foresee only “some small compromises.” 

Brands are also challenging the idea that eco-credentials necessarily result in price increases, with examples of local sourcing and use of the circular economy potentially lowering costs.

Again, in 2022, I covered (in this newsletter) the importance of sustainability and what the likes of The Guardian are doing in this space and how it will become more important and this year progresses. Take note! 

3. A reckoning for Big Tech: The majority of advertisers (62%), according to WARC, agree that a range of changing market dynamics are forcing strategic shifts from the tech giants. Respondents concerned about the dominance of the “duopoly” have halved over the past two years. 

More respondents plan to decrease investment in Facebook than increase it for the first time in six years, which suggests brands are resetting their relationships with Big Tech. 

Same applies in the media industry as we begin to look for new relationships with the tech giants base on things such as trust and value as well as a fair share of the industry revenue pie. 

4. The clash of demand, delivery, and disruption. Supply chain disruptions are expected to hit brands in 2023 but not evenly: 60% of marketers anticipate non-trivial supply chain disruptions, although just 26% expect they will be significant or severe. 

This rises to one in three amongst European respondents. And 52% felt “challenger brands” (those brands in an industry where it is neither the market leader nor a niche brand but which have business ambitions beyond conventional resources and an intent to bring change to an industry) would be the hardest hit as they struggle for profitability. 

Advertisers have an important role to play in managing and minimising supply chain disruption. The question is: Are we in tune with this and how we can get closer ties with our advertisers and agencies by fully understanding the world in which they operate? 

It is interesting to note that McKinsey and Accenture also both highlight this area an important in 2023 (see “further reading” below).

5. The era of "bubble up” culture: Media and audience fragmentation was the second-biggest concern in WARC’s survey, with 34% of respondents choosing it. Among North American respondents, it was the highest ranked. Two-thirds of advertisers expect to focus more on platforms that “allow them to stitch together interest-based communities” to create reach in a fragmented media world. A learning for us?

Other channels with deeply embedded communities such as gaming and influencers/social media content are also set to attract more investment from advertisers this year.

Conclusions and insights 

It seems to me that despite the differing angles of the three companies I have highlighted, there are some common themes around what we can expect in news media in the coming year:

Subscriptions: a new structure?

We are moving into an era of ad-funded subs — especially as the cost-of-living crisis bites hard in many areas. The likes of Netflix lost many subscribers in 2022 and led the way in saying that a series of subscriptions will follow, some cheaper (with ads included) some more premium offerings (with no ads). The choice will lie with the customer.

Are you considering this, too? 

The one thing I have some issue with here is what value we place on our advertiser’s money. It’s something I have wrestled with for years. If we in effect say to our advertisers that we really value them — and then in effect dismiss their contributions if a customer decides to spend a little more money to eliminate their ads — what message does that give? It seems we need to be careful in how we approach and package this very sensitive area.

Video strategies

It is highlighted by the three ad giants above in differing guises that video advertising will come to the fore now. And we need to, if we haven’t already, start to have a video strategy as part of our ongoing quest to find new revenue streams. Remember, digital video advertising will increase by 11% in 2023 and represents the second fastest growth rate of all digital formats.

Search vs. AI? 

We hear search is recession proof. But how will that shape up alongside AI and market developments? 

I think it is interesting to look at this in the context of the various AI platforms now being developed around the globe and pontificate how they may influence this year. Will they computer with Google search for instance? 

Here’s what you get, for example, when asking AI platform ChatGPT if it will be competition to Google: 

ChatGPT is a powerful language processing model developed by OpenAI, which can generate human-like text in response to prompts. It has a wide range of possible uses, such as in chatbots, automated writing, and other natural language processing (NLP) tasks. However, it’s not designed or intended to compete with Google. Google’s search engine is a web-based tool that crawls, indexes, and searches the internet for information, while GPT is mainly focused on Natural Language Processing Tasks. GPT can be used in different ways, for example to generate summaries, article, automate customer service, and more, Google on the other hand is a search engine that can search for information on the web. The two tools have different purpose and functions, and it would be unlikely for ChatGPT to compete with Google as such.

I have bolded above not one but two denials that AI and search will compete. The famous Shakespeare quote from Hamlet comes to mind — “the lady doth protesteth too much, me thinks” — when reading ChatGPT’s statement.

Interest-based communities 

Interest based audiences seems to come out as being important amongst the predictors. We shouldn’t be surprised either. Programmatic advertising allows for audiences to be diced and sliced in many ways, and the realisation that cross cooperation between media companies can be a good thing after all is becoming increasingly adopted.

I am thinking about the Ozone Project in the UK being just one example. Expect more collaboration and more smart targeting of audiences in the future as we seek to provide a more personalised service to our advertisers.

Sustainability 

Media companies are expecting to continue with their sustainability objectives despite the economic situation. There is a belief that it doesn’t need to lead to cost/price increases to continue with the start they made in 2022.

Many are adopting sustainability as a competitive advantage. Sustainability is commonly described as having three dimensions/pillars: environmental, economic, and social. And in everyday use, sustainability is often focused on countering major environmental problems such as climate change. 

We can’t afford to ignore it as a publisher, consumer, nor as a community champion in the market we serve. Expect more advertising focus around sustainability in 2023.

Further reading

• Future-proofing the supply chain.
• Building Resilient and Sustainable Supply Chains (The Ukraine war effect).
• New Chat Bot Is a “Code Red” for Google’s Search.
• E-commerce trends 2023: Top 15 stats + aspects shaping online shopping.
• AI in search engines. Everything you need to know.
• Sustainability advertising and its impact on brand personality, credibility and attitude.

About this newsletter 

Today’s newsletter is written by Mark Challinor, based in London and lead for the INMA Advertising Initiative. Mark will share research, case studies, and thought leadership on the topic of global news media advertising. Sign up for the newsletter here.

This newsletter is a public face of the Advertising Initiative by INMA, outlined here.

E-mail Mark at Inma.mark@gmail.com with thoughts, suggestions, and questions or follow him on Twitter (@challinor).

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