In an era where digitalisation is redefining every aspect of our lives, the advertising sector is not left untouched. Recent forecasts from GroupM, WPP’s investment arm, shed light on the evolving landscape of global advertising, highlighting a shift towards digital dominance that is reshaping the industry’s future.
A Steady Climb Amidst Economic Challenges
GroupM’s latest insights reveal an anticipated global ad revenue growth of 5.8% in 2023, reaching a monumental $889bn. Despite a slight deceleration expected in 2024 to 5.3%, the forecast for the next five years suggests a compound annual growth rate of 5.6%. This projection comes amidst economic headwinds, including higher interest rates and uncertainties in key markets like China, which are expected to temper business development. However, a silver lining emerges as global inflation rates are forecasted to decline, suggesting that the real-term growth in 2024 may be more robust than it appears.
The Digital Epoch
The pivot to digital is unmistakable, with GroupM predicting that by 2028, the digital market will surpass the entire advertising industry’s size in 2022. This shift is underscored by the meteoric rise of the top five global ad sellers – Google, Meta, ByteDance, Amazon, and Alibaba – which together have propelled the industry forward with a compound annual growth rate of 25.4% from 2016 to 2022.
Meta, in particular, stands out, poised to generate $130bn in ad revenue in a single year, accounting for nearly one-seventh of the total global ad revenue. This growth is not without its challenges, as social media giants face increasing legal scrutiny in major markets. Yet, the sector remains bullish, with social media ad revenue expected to grow by 10.5% in 2023.
The Rise of Retail Media
Amidst the digital surge, retail media emerges as a burgeoning segment, predicted to add over $10bn in revenue in 2023 alone. Despite a slight adjustment from earlier forecasts, the segment’s growth trajectory remains positive, with an 8.3% increase expected in 2024. Dominated by giants like Alibaba, JD.com, and Amazon, retail media is poised to redefine advertising in the e-commerce realm.
The Linear TV Conundrum
As digital platforms soar, traditional TV advertising faces an existential challenge. GroupM forecasts a decline in TV’s share of the global ad market to 17.9% this year, with linear TV ad revenue expected to hit its lowest point since 2005 by 2028. Yet, live sports and events continue to be a lifeline for linear TV, capturing a growing share of viewership and advertising dollars.
The Streaming Revolution
The rise of streaming services is nearing a pivotal moment, with revenues poised to surpass those of linear TV. The introduction of ad-supported tiers presents a new revenue stream, although preferences for ad-free options and limited ad inventory may impact the overall growth potential.
Looking Ahead
As the advertising industry navigates this digital transformation, the road ahead is fraught with challenges and opportunities. The resilience of traditional media, the regulatory landscape for social media, and the evolution of consumer preferences will all play critical roles in shaping the future of advertising. Amidst these changes, one thing remains clear: the digital epoch is here, and its impact on the advertising landscape is profound and enduring.
