Magna is reporting that non-cyclical advertising revenues grew by +9.1% in the fourth quarter of 2023, the strongest quarterly growth in almost two years, bringing full-year 2023 ad market growth to +5.7% and that the ad market will continue to grow in 2024, thanks to an improving macro-economic outlook, strength in the digital media and streaming sectors, and cyclical events like political advertising.
In its newest estimates, Magna. which is the forecasting and intelligence unit of IPG Mediabrands, anticipates that media owners' U.S. ad revenues will increase by +9.2% to reach $369 billion. That’s nearly one percentage point above the previous forecast (+8.4% in Dec. 2023), Magna said.
It is also predicting local TV/video ad sales to spike by 26% to $23 billion in 2024, long-form streaming advertising will expand by +13% to hit the $10 billion milestone and that social media advertising will grow by +14% to reach the $80 billion milestone.
But non-cyclical national TV ad sales (including linear networks and AVOD on premium long-form streaming) will decline by nearly -5% to $44 billion this year, Magna predicted.
“Several factors led MAGNA to increase its US ad market growth forecast,” explained Vincent Létang, executive vice president Global Market Intelligence and author of the report. “That includes an improved macro-economic outlook with GDP growth raised from 1.7% to 2.4% in the last few months, the momentum of digital media formats: social media, retail media, and streaming. The latter is driven by a strong expansion in the reach and marketing opportunities offered by ad-supported streaming. That leads Magna to raise the non-cyclical growth forecast to +6.7%. We are slightly reducing the forecast for cyclical spending (due to a slowdown in political fund-raising) but, overall, we now expect total media owner ad sales to grow by +9.2% this year (compared to +8.4% in our previous update) to reach $369 billion.”
The new forecast estimates that advertising spend around major cyclical events will drive approx. $10 billion of incremental ad sales as the 2024 election cycle will generate $9 billion of additional ad revenue for media owners (+13% vs the 2020 cycle). This will add 2.5 percentage points to the non-cyclical growth rate, bringing total revenue growth from +6.7% (non-cyclical ad sales) to +9.2% (total ad sales). The impact will be even greater for some media categories like Local TV (excluding political -4%, including political +26%), Magna reported.
Digital pure players will capture most of the market growth in 2024, with non-cyclical advertising sales growing by +12% to $261 billion (a 72% market share) while the advertising revenues of traditional media owners will grow by just +3.5% (as the influx of cyclical dollars offsets a -3% decline in non-cyclical ad sales), Magna reported.
Several media channels will outperform in 2024, Magna said.
Premium long-form streaming (CTV, AVOD, FAST) will expand ad sales by +13% this year, driven by the introduction of advertising on Amazon Prime Video, to reach the $10 billion milestone (22% of total national TV). Social Media advertising will also grow by +13% while the ad sales of Search/Retail formats will grow by +12%, Magna predicted.
Non-cyclical national TV ad sales (including linear networks and AVOD on premium long-form streaming) will decline by nearly -5% to $44 billion this year, as the growth in streaming ad sales (+13%) will not fully offset the continued decline of linear ad sales (-9%). Linear TV continues to struggle from eroding reach and poor ratings.
Premium long form streaming ad sales will reach the $10 billion milestone, or nearly a quarter of total national TV ad sales (22% of $44 billion), further boosted by the launch of advertising on Amazon Prime Video in January, the forecast noted.
Magna is forecasting that Amazon Prime will generate approx. 2.6 billion viewing hours per quarter in 2024, of which the bulk will be ad-supported from February onwards. That alone will expand the volume of streaming ad impressions by at least 8% in 2024. With the introduction of advertising on Amazon Prime Video, all the leading streaming platforms except AppleTV+ are now offering an ad-supported tier.
Elsewhere, local TV/video ad sales will increase by +26% to $23 billion this year thanks to the election cycle, more than offsetting a drop in -3.5% in non-political sales, hit by a slowdown in the Automotive vertical.
The report noted an improved economic outlook with macro-economists more optimistic about the economy in 2024 than they were a few months ago. In the Philadelphia Fed’s latest report, released in February, economists increased 2024 real GDP growth expectations from +1.7% (November update) to +2.4%. In fact, the economic consensus on 2024 GDP growth has now increased in the last three updates, from a mere +1% back in May 2023. Other macro indicators are generally encouraging too, the report argued.
Economists expect consumer price inflation to slow down to 2.5% (incl. food & energy) from 9% mid-2022 and still 3% and 4% in January and February. Slower inflation contributed to a significant improvement in consumer sentiment in the last three months. The University of Michigan index stood at 77 in March 2024, compared to 50 in mid-2022 (when inflation peaked) and only 61 in November 2023.
A 11-minutes video presentation of this research is available here. The next Magna Ad Forecasts (US and Global) will be published in June 2024.
