Forecasters predict pharma’s multi-billion-dollar TV ad buys will shrink in 2023

Source: Getty Images.
Source: Getty Images.

A pharma retrenching may be one contributor to what ad forecasting firms say will be slower advertising growth than previously expected.

As 2022 draws to a close, advertising forecasters are tempering their predictions for ad spend growth in 2023. Notably, the pharma vertical may be one reason for the sentiment, with some erosion anticipated in drugmakers’ multi-billion-dollar TV ad buys.

A global ad forecast from IPG’s Magna predicts media owners’ advertising revenues will grow by 5% to reach $833 billion in 2023. That’s 1.5 percentage points below Magna’s previous forecast, issued in June, due to what the firm sees as a deteriorating macroeconomic outlook. It also represents a slowdown from 2022, which is predicted to finish with growth of 7% and hit $795 billion, per Magna’s outlook.

Meanwhile, a separate forecast from WPP’s GroupM calls for global growth of 5.9% in 2023, versus its 6.4% estimate in June. It’s also a shade below GroupM’s prediction for 2022 global ad revenue - 6.5%, excluding political advertising, down from a June forecast of 8.4%. 

Pharma historically has been a bellwether presence on TV, especially in the U.S. Given expected sluggishness in the U.S. economy, Magna predicts ad sales of traditional media owners will shrink, such as publishing and TV, by -3% and -4%, respectively. 

In the period immediately preceding the COVID-19 pandemic, pharma’s TV spending plateaued. However, traditional media was something of a bright spot during the pandemic, as drugmakers leaned more on radio and TV, and less on out-of-home (OOH) and cinema. Since then, pharma ad spending has stayed essentially flat

Additionally, Magna counts pharma, along with consumer packaged goods and finance, as key industry verticals that could moderate their TV outlays in 2023. That’s as opposed to verticals like entertainment, travel and betting, whose overall ad spending will continue to be driven by post-COVID recovery and regulatory relaxation, the firm predicts. 

TV has been suffering from ongoing erosion of linear reach and live viewing. Time spent and ratings have been decreasing between 5% to 15% per year, Magna observed. That decline has only been partially offset by growing audiences and ad sales on non-traditional platforms or formats. 

Cross-platform TV ad revenues grew by 1.7% in 2022 to $172 billion but will decrease by 4% in 2023, per Magna’s report. That said, TV companies can count on a few things, including strong growth for non-conventional ad sales like ad-based video on demand (AVOD) on streaming platforms, as well as pricing power. 

Moreover, with brand safety concerns prompting marketers — including those in pharma — to shift priorities, some brands may slow down their digital diversification, Magna said.

One bright spot in Magna’s report was its forecast of stability in audio advertising (+1%). The company also said OOH will grow by 6% to nearly $32 billion, just ahead of where it was pre-COVID. The forecasting firm pegs digital ad growth at 8% for next year, reaching $557 billion, driven by such factors as ecommerce and shifts in media consumption. 

As for the fastest-growing ad format, it’s video (+11%), followed by search (+10%) and social (+7%).

This article originally appeared on MM+M.


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