Advertising Proves Resilient Amidst Economic Uncertainty

KEY TAKEAWAYSThe June Update of MAGNAamp8217s Global Ad Forecast released on Monday June 16 projects global advertising revenues for media owners to reach 979 billion in 2025 up 49 from 2024The advertising revenues of Traditional Media Owners TMO including TV radio publishing and outofhome are expected to erode by 3 to 264 billion due to economic uncertainty Adjusted for the lack of US elections and Olympics in 2025 global TMO revenues would be flatDigital Pure Players DPPs ad sales will grow 8 to 715 billion 73 of total ad sales DPP growth is driven by rising usage AI innovation ecommerce competition and retail media networks expected to generate 163 billionSearch and Retail Media ads eg Google Amazon Walmart will rise 8 to 357 billion remaining the largest DPP segment Social Media ad sales Meta TikTok will grow by 11 to 242 billion while shortform video YouTube Twitch will increase 7 to 80 billionIn most markets total ad market growth will range from low single digits Germany 3 Japan 4 to mid high single digits Canada Australia France 5 Italy Spain UK 6 India 8The US ad market will grow 46 to 398 billion excluding cyclical 69 TMO revenues will decline 71 to 104 billion noncyclical 12 DPP revenues will increase 96 to 294 billion noncyclical 101The global ad market will reaccelerate in 2026 as the economy stabilizes and major events return incl Winter Olympics Italy FIFA World Cup US and US Midterms Global ad sales are projected to rise 63 surpassing one trillion dollars for the first time while the US ad market grow 78 to cross the 400bn milestoneVincent Lamp233tang EVP Global Market Research at MAGNA and author of the report saidamp160amp8220After a very robust year in 2024 MAGNA expected the global advertising market to moderate in 2025 However given the less optimistic economic forecasts and reduced business confidence since our last update in December we39ve adjusted our 2025 growth forecast slightly downward by 12 percentage points now projecting 49 The moderation has been fairly mild to date with digital media showing particularly strong in the first quarter We believe the marketing industry has learned from the COVID period and now understands the importance of consistent communication and balanced media strategies especially amidst consumer uncertaintyamp8221The summer update of MAGNAamp8217s amp8220Global Ad Forecastamp8221 predicts media owners net advertising revenues NAR will reach 979 billion this year growing 49 over 2024 slowing down from 103 in 2024 Neutralizing the significant impact of cyclical events on ad spend in 2024 US Elections Euro Copa America Summer Olympics and in 2025 no such major events the market slowdown is still real but more modest noncyclical ad spend and ad revenues slowed from 89 in 2024 to 62 in 2025MEDIA TRADITIONAL MEDIA OWNERS TO STRUGGLEMAGNA was always anticipating a deceleration in the global advertising market39s growth for 2025 following the exceptional performance of 2024 Analysis of firstquarter financial reports confirmed weaker ad sales among traditional media owners TMOs amidst growing economic uncertainty TMO ad revenues radio and television broadcasters newspaper and magazine publishers outofhome and cinema decreased by 1 yearoveryear globally with key markets experiencing declines of 2 to 4 Germany UK France Canada In contrast digital pure players DPPs demonstrated remarkable resilience with firstquarter ad sales increasing by 12 globally and 13 in the USThe International Monetary Fund IMF reduced its 2025 global economic growth forecast from 32 in October 2024 to 28 in its April 2025 update reflecting a slowdown in economic activity during the first quarter and increasing uncertainty surrounding global trade Exportbased economies are particularly vulnerable to disruptions in international trade this year and may experience more significant slowdowns this year including Germany 0 and Japan 06 Economic forecasts of course remain subject to revision over timeConsequently MAGNA projects a slowdown in global advertising growth from 103 in 2024 to 49 in 2025 which is 12 percentage points below the previous forecast of 61 in December 2024Traditional media owners TMOs historically focused on television audio publishing OOH and cinema may be most affected by the absence of major events and the deteriorating business environment Global TMO ad revenues are expected to decrease by an average of 32 this year reaching 264 billion Excluding cyclical ad spend TMO ad revenues would have remained flat 01 Television ad sales are projected to decline by 5 radio ad sales by 1 and publishing by 6 while OOH and cinema ad revenues are expected to grow by 5 These figures include TMOs39 nonlinear ad sales eg adsupported streaming digital audio publishers39 digital ad sales which already account for 25 of total TMO ad revenues and are growing by 15 to 30 annually mitigating the decline of legacy linear ad formats eg linear commercials on broadcast TV ad pages in newspapers and magazinesAdsupported streaming continues to experience rapid growth in access consumption and advertising sales as nearly all streaming TV platforms now offer more affordable adsupported plans These quotlimited adsquot plans are proving successful with a majority of new subscribers opting for them and some existing subscribers switching to reduce their streaming costs MAGNA estimates that premium longform CTV streaming Hulu Netflix Peacock Prime Joyn RTL etc ad revenues now represent 15 of total longform video advertising revenue worldwide totaling 23 billion out of 155 billion In more advanced markets like the UK and the US this figure is already between 20 and 25Digital PurePlay DPP media owners offering SearchCommerce Social ShortForm Video Static Banners and Digital Audio ad formats are projected to reach 715 billion this year growing by 8 over 2024 and accounting for 73 of total ad sales DPP ad sales are driven by several organic growth factors including the continued rise of ecommerce and retail media networks increasing consumption and engagement in developed markets and growing penetration in emerging markets In addition to longterm organic growth factors digital pure players may benefit from another factor in 2025 During downturns or periods of low visibility marketing budgets are often redirected towards quotperformancequot lowerfunnel channels which are expected to deliver better scalability and accountability in supporting shortterm sales This may contribute to the resilience of digital media and the vulnerability of traditional media this year However MAGNA believes that most marketers will avoid repeating the overdrastic cuts seen during COVID and will maintain a balanced marketing and media mix to address consumer anxietyWithin DPP ad formats Keyword Search will remain the largest digital advertising format growing by 8 to reach 357 billion While traditional Core Search matures eg Google Bing Baidu 7 to 217 billion the search format is now driven by Retailer Search eg Amazon and product listings in retail media networks 12 to 140 billion Social Media ad sales eg Meta TikTok will grow by 11 to 242 billion and ShortForm PurePlay Video platforms eg YouTube Twitch will expand ad revenues by 7 to 80 billionMARKETS TRADEINTENSIVE MARKETS MAY SUFFERSome markets are particularly vulnerable to the uncertainties of global trade this year due to the significant percentage of their industrial output exported to the US This includes Japan Germany and China For instance Japan and Germany each sell millions of cars in the US annually with approximately half of those vehicles manufactured outside the US and therefore subject to a 25 tariff as of this writing Consequently both countries39 auto industries are likely to experience reduced sales this year leading to cuts in marketing and advertising spending in their domestic markets and in the US This is why we anticipate belowaverage advertising growth in these markets for 2025 Germany at 3 and Japan at 4 for allmedia spending with a decline in TMO ad sales between 1 and 3Other major manufacturing markets may also be negatively impacted by a decline in US exports including Vietnam Mexico and South Korea Additionally trade hubs such as Singapore and Belgium may suffer from a reduction in the volume of global trade in the coming months while oil producers may be indirectly affected by the slowdown in Chinese and overall global demand Conversely MAGNA expects aboveaverage ad spend resilience in several large markets Italy and Spain 6 the Netherlands 7 India 8 and Brazil 12The US remains the largest advertising market in 2025 accounting for 41 of global ad spend followed by China 17 Japan the UK and Germany Together these five largest ad markets concentrate 73 of global ad spend Advertising intensity represented by the ratio of ad spend per capita varies significantly across markets reflecting the purchasing power of local consumers and the maturity of the media and advertising ecosystem from 1100 in the US 800 in Switzerland and the UK 700 in Australia and 500 in Germany to just 11 in IndiaADVERTISERS THE AUTOMOTIVE INDUSTRY AT RISKWhile MAGNA expects total advertising spending to grow in 2025 several industry verticals may be challenged by economic slowdown supply chain and trade disruptions Technology Pharmaceuticals Retail and Automotive appear to be at risk On the other hand several other large industry verticals should be relatively immune to international trade uncertainty including CPG Finance Insurance Telecoms Healthcare and TravelLooking at Automotive several major autoexporting countries such as Mexico Canada Japan and South Korea ship more than a million vehicles each year to the US and others like Germany and the UK also rely heavily on US sales With no clear outlook on how trade policy will evolve how supply chains will need to adjust or how long these headwinds will last many auto brands may pull back on marketing expenses specifically upperfunnel traditional advertising formats amp8211 in coming months While the car market is holding in Europe so far Europeanbased automakers may also need to reduce marketing spending in Europe too as the loss of US sales hurt their revenues and profitability In the US strong sales early in the year partly driven by buyers moving ahead of potential tariffs are expected to fade in the second half As the 25 tariff on imported vehicles and parts will also hurt US carmakers by increasing production costs Overall MAGNA expect global automotive advertising is to decline by 2 in 2025 and 3 in the US spending on traditional media channel will decline by highsingle digit Looking at 2026 the loss of US federal EV subsidies and new European regulations on Chinese vehicle imports will weigh on the auto industry and its marketing investmentFOCUS ON THE USMedia ownersamp8217 advertising revenues in the US are forecast to reach an alltime high of 398 billion in 2025 as they close in on the 400bn milestone growing 46 over 2024 or 69 when excluding cyclical ad spending down from 99 in 2024 This is slightly stronger 03 than our previous full year forecast in March 2025 following a strongerthanexpected start of the year 91 in 1Q25 excluding cyclical despite the deterioration in investor confidence and consumer confidence that started in February well before the tariffs episode early April MAGNA still expects quarterly growth rates to slow in the next three quarters but also still expects resilience in the marketplace as the macroeconomic indicators gradually stabilizeDigital Pure Players revenues grew by 13 in the first quarter and several digital giants provided confident guidance for 2Q growth For the fullyear 2025 MAGNA expects DPP ad revenues to rise by 10 to 297bn with Search and Retail Media ad revenues growing 96 Core Search 8 and Retail Search 14 Social Media up 12 and ShortForm Digital Video up 8Conversely traditional media owneramp8217s ad revenues will fall 7 to 100 billion or by a more modest 12 when excluding cyclical spending from 2024 eg Presidential election Summer Olympic games Cross platform National TV which includes both linear and streaming sales will erode by 08 to 46bn as linear declines of 5 will just offset streaming growth of 125 Elsewhere in the US advertising market OOH sales will gain 22 to 99bn while Audio sales will drop 2 to 159bn Publishing sales will decline 14 to 15bn and Local TV sales will fall 5 to 162bnMAGNA expects US ad spend to reaccelerate in 2026 and benefit from the return of cyclical drivers Winter Olympics in February FIFA World Cup hosted by the US in JuneJuly and the midterm election cycle in November Total media ownersamp8217 ad revenue will grow 78 with noncyclical spending up 61 to reaching the 400 billion milestone 429 billionPosted at MediaVillage through the Thought Leadership selfpublishing platformClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNet

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