US ad spend jumped 5.8% in Q2 and is on pace for a record year, forecast says
- U.S. ad spending grew 5.8% in Q2 after increasing 6.5% in Q1, putting it on track to reach an all-time high in 2018, MediaPost reports, citing an updated forecast by IPG Mediabrands’ Magna. The U.S. ad market is projected to exceed $200 billion for the first time in 2018, totaling $207 billion for all four quarters, a 6.9% increase from 2017.
- Magna also raised its 2019 forecast, predicting that ad spend will increase from 3.6% to 4%.
- Digital media is projected to increase 16% in 2018, grabbing a 51.5% market share. Video will grow 24.7% and social 32.6%, according to the report.
Magna said it revised its forecast because the ad market was stronger than expected during the first half of 2018 — when it grew 6.1% — and “robust macro-economic forecasts,” a reference to indicators that the economy is strong like a growing stock market and low unemployment rates. With concern easing around a potential trade war, one potential hiccup for the economy appears to have been avoided.
Digital media, video and social media showing the strongest growth isn’t surprising, since marketers have been shifting their budgets to these formats. Digital ad rates hit record highs in May 2018, per the Ezoic Ad Revenue Index, and have been experiencing record-breaking trends this year, signaling that there is more competition for digital ad inventory.
While more marketers investing in digital inventory, there are signs that the digital advertising duopoly formed by Google and Facebook may be starting to weaken, which could temper growth in ad rates if digital advertising's quickly rising star Amazon is able to lure brands away from its competitors, forcing them to compete more for the business. This week, eMarketer revised its projections for U.S. ad revenue, forecasting that Facebook and Google will control a combined 57.7% of U.S. digital ad revenue in 2018, down from 59.1% last year. Amazon is expected to generate $4.61 billion this year, higher than previous projections of $2.89 billion and giving the company a 4.15% share of the U.S. digital ad market. Amazon now ranks No. 3, surpassing Oath and Microsoft for the first time, among digital advertising platforms.
Still, Google and Facebook remain giants in digital advertising. In June, Magna upgraded its global ad revenue growth projections to 6.4% to $551 billion in 2018, up from the previous forecast of 5.2%. The adjustment was attributed to Facebook and Google’s strong first quarters, when the duopoly had a combined revenue growth of 31%.