- The U.S. ad market is projected to reach an all-time high in 2018, with media owners collecting $197 billion in net ad revenues, a 5.5% growth from 2017, according to Magna’s new advertising forecast. This is a 2.7% acceleration on last year’s growth, and stronger than Magna’s earlier forecast of 5%.
- Digital ad formats, including search, video, display and social, will continue to make up the largest share of ad growth and are projected to account for 50% of total ad sales in 2018, a year earlier than previously forecast, according to the report. Digital ad sales are expected to grow by 14% this year to reach $97 billion, and 60% of that total will come from mobile advertising.
- Cyclical events in 2018, including the U.S. midterm elections, Winter Olympics and FIFA World Cup, will bring in $3.7 billion in incremental net advertising revenue. Without these events, non-cyclical ad sales will grow 3.7%, lower than the 4.5% in 2017. Traditional offline advertising sales will drop 5% in 2018 to $96 billion, excluding cyclical events. National linear TV ad sales are projected to be flat, local TV will grow 10%, out-of-home is projected to grow by 2%, print will decrease 18% and linear radio will decrease 4%, according to the projections.
A key finding in the Magna research is what the company calls the emergence of a “vertical divide” in 2017, where verticals, like consumer packaged goods, pharma and movies, continued their loyalty to linear television. Digitally-centric product categories, including retail, technology and finance, continue to invest in digital formats and further shift from TV.
The report also highlighted a “Growth Paradox” that exists in the broader ad market, where growth is modest at a time when the macro economic environment is one of the best in the last 20 years. In other words, consumers are spending money and feeling optimistic, so marketers should be increasing their ad spend even more than they are to reach these consumers. One explanation for the paradox posited by Magna is that consumers are spending more on products and services, like technology, travel and home improvement that devote smaller shares of their revenues, about 1% to 3%, to advertising, rather than on CPGs, food, quick-service restaurants and automotive that typically invest 4% to 10% of revenues in advertising.
The Growth Paradox is also supported by how, across many categories, consumers are purchasing high-end and niche products as well as boutique retailers and these marketers typically spend less on advertising.
In this environment, the bright spot continues to be digital ad revenue, which is gaining ground on other advertising formats. Social media is projected to lead the digital growth at 30%, as growing usage, product innovation and strong pricing models are driving the increase.
Digital video ad sales are expected to jump 23%, as video consumption transitions to digital platforms like YouTube, Hulu and others. Marketers are also frequently moving some of their existing ad inventory to digital video, the report notes. In separate research by Magisto released last fall, 60% of businesses reported spending more than 25% of their marketing budget on video, and companies were planning to spend $135 billion on online video in 2017, 2x more than on TV spots and 1.5x what they planned to spend on other digital ad formats.