GroupM has recently published its mid-year global forecast, examining the impact of external factors such as technology, culture, government, and the economy on the advertising industry in the coming months and years. To present its findings, GroupM has employed a framework based on a PEST analysis.
According to the GroupM forecast, advertising revenue growth is expected to return to a more “normal” pace. The growth projection for 2023 remains consistent with the December forecast of 5.9%. However, when adjusting for inflation, the forecast indicates negative growth.
GroupM attributes the consistent forecast, despite macroeconomic influences such as inflation and interest rates, to the increasing maturity of the digital channel and its major players. Digital pureplay ad revenue is expected to account for 68.8% of the total in 2023, with single-digit growth anticipated over the next five years.
The GroupM forecast predicts that global advertising expenditure in 2023, excluding U.S. political advertising, will reach $874.5 billion. The main drivers of advertising growth include the rising adoption of connected TV, the growth of retail media, the integration of artificial intelligence in the advertising sector, among others.
The adoption of connected TV by both consumers and advertisers is rapidly increasing, contributing to a compound annual growth rate of 10.4% in ad revenue between 2023 and 2028. Subscription video on demand (SVOD) represents a significant portion of total video spending in major markets, allowing streaming providers room to expand their subscriptions.
Retail media is identified as the third fastest-growing advertising channel in 2023, following digital out-of-home and connected TV, although these channels remain smaller in size. The forecast indicates that retail media, including ad revenue from last-mile delivery services, will experience a 9.9% growth in 2023, reaching $125.7 billion and representing 14.4% of total advertising. It is projected to surpass TV revenue (including connected TV) by 2028.
The GroupM forecast also suggests that artificial intelligence (AI) will play a significant role in informing or impacting at least half of all advertising revenue by the end of 2023.
While the overall forecast for 2023 growth remains consistent, there have been shifts within individual markets. China, for instance, is now expected to achieve a 7.9% growth in ad revenue in 2023, up from the 6.3% projected in the December 2022 report.
The U.S. estimate remains relatively unchanged at 5.1% for 2023. However, some markets have revised their expectations downward due to macroeconomic factors. India’s growth, for example, has decreased from 16.8% to 12.0%, while Australia, Canada, France, Indonesia, Hungary, and others have also adjusted their forecasts downward.
Conversely, Brazil, Malaysia, Hong Kong, Middle East and North Africa (MENA), Nigeria, the Philippines, and Poland have raised their expectations compared to the December forecast. There are a few markets, such as Singapore, Kenya, and Sweden, that now anticipate a decline in 2023 instead of the growth forecasted in December.
The concentration of advertising revenue continues to increase, albeit at a slower rate, both in digital and across total advertising. The top 25 global advertising sellers, with the majority being digital platforms, accounted for 75.3% of total advertising revenue in constant currency, up from 74.0% in 2021.
Google remains the largest global media owner with advertising revenue of $213.1 billion, followed by Facebook with $119.5 billion in advertising revenue.
Global audio, including digital extensions, is forecasted to experience a slight decline of 0.3% in 2023 and remain relatively stable over the next five years.
Read the full GroupM report here.