An economy improving faster than expected is pushing up advertising revenue forecasts for 2021. Media research and investment firm MAGNA projects revenues will increase 6.4 percent this year to $240 billion—the normalized growth rate would be 8.6 percent if the impact of cyclical ad spending, in this case elections and the Olympics, is discounted in 2020 and 2021. MAGNA’s 6.4 percent forecast is 2.3 points ahead of its previous outlook for 2021, released in December 2020, which it attributes to a stronger economic outlook supported by the new stimulus package, the pace of COVID-19 decline and a return to normal sporting events.
Breaking 2021 down into quarters, MAGNA projects that total ad spending will grow six percent year-over-year in the first quarter of the year, 15 percent year-over-year in the second quarter, six percent year-over-year in the third quarter—boosted by approximately $800 million in incremental revenue generated by the Summer Olympic games—and a more modest two percent year-over-year growth in the fourth quarter—reflecting the impact of fourth quarter 2020’s strong political spending and holiday sales.
MAGNA expects the improving business conditions to fuel marketing expenditures and allow most industry verticals to grow advertising spending again. It notes that the strongest ad spend growth rates will come from travel, automotive, drinks and movies, following heavy ad budget cuts in 2020. Most advertising channels and formats are expected to stabilize or grow ad revenues in 2021, with double-digit growth projected from social media, digital video, search and out-of-home (OOH), and low- to mid-single-digit growth for national TV and radio.
Overall non-political linear ad sales (TV, radio, print, out-of-home) will grow by one percent to $77 billion, while digital ad sales (search, social, video, display, audio) will grow by 13 percent to $161 billion. MAGNA anticipates that digital ad formats will capture two-thirds (67 percent) of total advertising sales for the first time. Cross-platform editorial media ad sales (linear and digital) will grow by four percent in 2021 (excluding cyclical), with TV (including broadcast and cable TV, plus long-form VOD) up four percent and audio (including broadcast radio, streaming and podcasting) up five percent.
MAGNA reports that the ad market recovered faster than it did during the last recession of 2008-2009. Total advertising (linear and digital) decreased during only the second quarter of 2020, compared to nine consecutive quarters in 2007-2009. Linear ad spending is suffering just as much as it did 11 years ago, but spending is expected to grow again in second quarter 2021 after four negative quarters compared to 11 consecutive quarters during the great recession.
MAGNA’s final estimate for U.S. media owners’ net ad revenues in 2020, that it notes shows even greater resilience than previous estimates indicates the U.S. market was essentially stable in 2020 at one percent to $226 billion. Non-political growth was also better than expected, slipping only two percent. The fourth quarter of 2020 was exceptionally strong, based on the analysis of financial reports from media companies due to economic stabilization, strong holiday sales and record political spending in October. Year-over-year ad revenue growth reached 12 percent—eight percent excluding political ad spending—but that it was entirely driven by, and captured by, digital ad formats (up 24 percent) while linear ad spending was down five percent.
The stability of the U.S. ad market in 2020, despite the economic recession, benefited from record-breaking political advertising. Political campaign spending generated $7 billion in incremental revenues for media companies, up 75 percent from 2016. Local television attracted the bulk of this spending but digital campaign spending almost tripled 2016’s total, at $1.5 billion. MAGNA also says that the ad market’s resilience in 2020 was supported by continued double-digit growth in digital advertising as ecommerce surged and digital marketing was adopted by both national brands and local businesses.
Digital ad sales grew by 13 percent overall while social and video formats grew by more than 20 percent. The “big three” digital giants—Google, Facebook and Amazon—outperformed again, growing ad revenues by 17 percent to reach a market share of 82 percent; other digital pure players also grew above average (27 percent); by contrast, traditional media companies and independent publishers barely stabilized digital ad sales.
“Our final estimate for U.S. advertising revenues in 2020 confirms that digital marketing was not only resilient but thrived in the COVID, as the organic growth factors all accelerated (shift to ecommerce, digital media consumption, small business adoption, etc.),” says Vincent Letang, executive vice president, global market intelligence at MAGNA. “Meanwhile, upper-funnel marketing budget, including branding ad campaigns, suffered just as much as in the previous recession. The latest economic and business outlook for 2021 gives us confidence that most industry verticals will grow ad spend again, up and down the funnel, and that will benefit nearly all media channels this year.”
