Global ad market reaches new heights, exceeds pre-Covid levels, Magna report
The global economy has recovered in-line with expectations (GDP +5.9% vs +6.4% expected in April) and, in most markets, so has marketing activity and advertising spending according to the latest Magna report.
Growth was particularly strong wherever COVID vaccination was fast and deep and allowed full business re-opening early in the year: US +6.0%, UK +6.8%, France +6.3%. Some other large markets displayed tepid economic recovery by comparison, due to underwhelming vaccination and lingering COVID restrictions and/or a manufacturing sector crippled by supply-chain issues: Japan +2.4%, Germany +3.1%.
Throughout the world, consumers spent more money than ever in 2021, using the forced savings they built up in 2020 as soon as restrictions to mobility and shopping were relaxed in the spring or summer. In that environment, national brands and local businesses competed to be the first or the most effective in reconnecting with consumers. Ad spend also benefited from the added driver of rescheduled international sports events (Summer Olympics, UEFA Euro).
Global all-media advertising spending grew by almost +22% to reach a new all-time high of $710 billion. This +22% growth represents the highest growth rate ever recorded by MAGNA, beating +12.5% in 2000 and a significant increase from MAGNA’s previous global forecast (June 2021: +14%).
Coming after the COVID lockdowns of 2020, and fueled by the gigantic Government stimulus packages, 2021 was always expected to show record growth, but again, this is growth in excess of recovery.
The compounded advertising market growth over the two years 2020-21 was +9%, higher than the average growth experienced during the four years before COVID (+6% per year between 2016 and 2019). It shows that, on top of economic recovery and COVID control, several organic factors drove the tremendous acceleration of 2021 (detailed below).
Linear ad format sales (TV and long-form video, radio, print, OOH, cinema) grew by +9% to reach $268 billion worldwide, regaining $21 billion of the $50 billion lost in 2020 (-17%). Global linear sales are thus back to 90% of pre-COVID (2019) levels.
Most of the growth came from demand-driven inflation in media costs, rather than increased volumes, ad loads or impressions. Linear TV CPMs for instance, grew by an average +13% globally due to strong demand from many key industries (Retail, CPG/FMCG) and shrinking supply (linear viewing resumed its long-term decline following the COVID surge in 2020). As a result, TV spending grew by +9% in 2021.
While mature linear ad formats recovered more or less in-line with the economy, digital ad formats proved once again that organic growth factors – beyond simple economic and marketing recovery – are turbocharging adoption and spending. Changes in lifestyles, media consumption, and business models continued to fuel an acceleration in digital marketing from national consumer brands as well as small, local and “direct” advertisers.
Digital growth from consumer brands comes partly at the expense of traditional linear channels, but in the case of small businesses (who represent the bulk of search and social ad spend and are growing much faster than big brands), it is almost entirely incremental money being added to the advertising pie. Digital advertising formats (search, social, video, banners, digital audio) grew by +31% to reach $442 billion or 146% of the pre-COVID market size. Digital ad formats now account for 62% of total advertising sales worldwide. All digital ad formats grew by double-digits in 2021, led by digital video formats (long and short form) +37%, social media +34% and search +33%. Pricing was also a key component to spending growth in 2021.
Supply increased too as digital video and social media continue to grow in reach and time spent, but this still was not enough to meet exploding demand, which led to double-digit inflation in CPM or CPC costs.
Back to traditional ad formats, TV did well in 2021, with global ad sales reaching $168 million (+9% and 98% of the pre-COVID level) but radio was even stronger, although it had more ground to make up: +16% to 28 billion (89% of 2019 sales).
Print ad sales were flat around $43 billion but when adding back the digital ad sales of news and magazine publishers, total print-related ad sales were up approx. +10%. Finally, out-of-home media sales grew by +12% to $27 billion.
The slower and more gradual recovery of OOH was expected due to the declines in consumer mobility, particularly in the heavily advertised transit segment, hurting OOH media audience and reach for most of 2021. OOH global ad sales stand at just 83% of their pre-COVID level at the end of 2021, but MAGNA is confident that ad sales will increase by double-digits again in 2022 and grow back to the 2019 level by 2023.
In 2021, all seventy ad markets analyzed by MAGNA recovered to some degree. Sixty-eight out of 70 markets reached double-digit growth. Several of the worlds’ largest markets posted above-average growth including the US (+25%), the UK (+34%), Brazil (+30%), Canada (+27%) and Australia (+23%) while China (+17%) and India (+14%) grew below average. Growth was above average in EMEA (+23%), North America (+25%) and LATAM (+26%, partly driven by economic inflation).
Looking forward to 2022, there are two potential threats to the global economy and the advertising marketplace: COVID and supply chain issues. Turning first to COVID, the recent increase in cases and endless controversies about vaccination and passes should not hide the good news that the war against COVID is nearly won thanks to vaccination.
Cases have increased again in 4Q21 to reach 500,000 daily worldwide by mid-November, but remain well below the previous peaks of 800,000 cases per day and, more importantly, the number of deaths remains relatively low (7,000 daily).
That is because 4.2 billion people have already received at least one dose of vaccine, representing more than half the world’s population (60% to 80% in most Western countries). Beyond some renewed mobility restrictions promulgated e.g. in Austria, Netherlands and Germany, most Government policies are prioritizing booster shots, encouraging or even mandating vaccination (Austria from Feb. 2022) rather than bringing back strict restrictions to circulation and business that hurt the economy.
Statement, Magna: “We are therefore optimistic that 2022, if not entirely COVID-free, will at least be exempt from the more severe policy responses that preceded vaccine availability and contributed to economic pressures in 2020 and the early part of 2021.
The second risk lies with supply-chain issues, including the insufficient supply of semi-conductors causing some industries, most notably automotive, to cut production, as well as the insufficient capacity in global shipping and raw materials. We believe the latter issues will self-adjust gradually throughout 2022 as demand cools down and capacities recover, but there is uncertainty about how long the semiconductor shortage will affect the automotive and technology industries. We have factored this in as a headwind for media types that rely particularly on the automotive vertical, for instance local television in the US.”
These risks and headwinds are largely offset, Magna further says, by the drivers on the horizon: strong economic growth (the IMF predicts +4.9%), further mobility recovery (esp. for transit), continued organic digital growth fueled by e-commerce, and no less than three cyclical events generating incremental advertising spending (Winter Olympics, US Mid-Term elections and FIFA World Cup). MAGNA thus predicts the global advertising market to grow by +12% and reach $795 billion in 2022. Linear ad format growth will moderate to +4% (still a stronger performance than pre-COVID) while digital ad formats will grow by +17% and reach 65% of total ad sales.
