The economy is still recovering from COVID-19, but U.S. advertisers are ready to spend as people slowly resume normal activities.
Magna revised its 2021 U.S. ad spend forecast upward on Monday as ad spend grew 32% year over year in the first half, reaching $130 billion.
Now, Magna predicts U.S. media owner revenues will grow 23% in 2021 to $278 billion and 12% in 2022, when the market will surpass $300 billion for the first time. By the end of 2021, U.S. ad spend will be 24% higher than it was in 2019.
The recovery was across all major verticals and media types, as advertisers got back into the market after pausing spend during the pandemic, said Vincent Letang, EVP market intelligence at Magna.
“The rebound was much stronger than anyone expected,” he said. “Cases are up, but whether they are vaccinated or not, people are coming back to their pre-COVID lifestyles. This latest surge, so far, is not threatening to derail the economic recovery.”
Recovery was the most prominent (+50% growth) in the retail, automotive and restaurant categories, which are starting to open back up, as well as competitive verticals such as finance and entertainment.
“Some brands have stopped communicating for many months so they need to come back and get back their share of voice,” Letang said.
As brands return to the market, digital media is continuing to reap the benefits. According to Magna, pure-play digital ad formats, including search, social, video, programmatic and digital audio, grew 49% year over year to $85.1 billion, with Q2 sales alone up 60% year over year.
Search and social media each grew by 49% year over year in the first half of 2021, while digital audio grew by 51% and digital video pure play by 68%.
Growth was driven by large brands returning to the market as well as small businesses, which flocked online to keep their doors open when stores shut during the pandemic.
“The digital market didn’t shrink last year; it just slowed down,” Letang said. “So we are massively above 2019 levels here.”
E-commerce has been a huge driver of digital ad spend, as the pandemic “triggered an acceleration in underlying business, lifestyle and consumption trends” that are unlikely to revert back, Letang said. Media consumption habits, driven by the shift to streaming and the rise of new social platforms such as TikTok, also drove the digital ad spend growth.
“Now there is almost no product category that is not in the wave of this fast transition to e-commerce,” Letang said. “That's benefitting digital media, for sure.”
But traditional media wasn’t totally left behind, growing 11% year over year thanks in part to the Tokyo Olympics, which, despite a decline in ratings, brought in an incremental $800 million to $900 million for TV overall. Letang estimates that CPM inflation largely offset ratings declines.
“We still don't have full transparency into whether streaming viewing offset the decline in Nielsen ratings, but we suspect it didn't,” he said. “We suspect there is really erosion for tentpole events.”
Double-digit CPM inflation is expected to hold for the Beijing Winter Olympics in 2022, but will eventually have to cool as “a lot of brands will be simply priced out of TV,” Letang said.
Overall, digital is driving much of video’s growth. Cross-platform video grew 20% in the first half, with broadcast media grewing 10%. Meanwhile, spend against ad-supported video on demand on channels such as Hulu grew 41%, and spend against pure-play digital video platforms such as YouTube grew 68% year over year.
Digital is also driving growth in audio and out of home, which grew 29% and 2%, respectively, year over year.
“Increasingly, we need to think of two markets,” Letang said. “Traditional media is growing in a good year, or looking at a recovery, but plateauing long-term. It can grow because of digital innovation, but not significantly. On the other hand, digital will continue to grow faster than the economy for at least the next five years.”