As a result, the company has cut their 2023 digital ad spending forecast by over $5 billion, reducing it from $284.10 billion to $278.59 billion. The reasons for this downgrade are twofold:
Inflation is driving up operating costs, and this is having a cascading effect on advertising expenditure. A World Federation of Advertisers survey found that 74% of major advertisers are stating that the economic downturn is impacting their 2023 budget decisions due to inflation raising operating costs and tightening budgets.
There are major changes afoot in the advertising industry resulting in uncertainty. The ripple effects of Apple’s AppTrackingTransparency policy have started to settle, but there are a few more things on the horizon, including the deprecation of third-party cookies, statewide privacy laws, and impending federal privacy legislation.
While we don’t really expect overall ad spend to bounce back anytime in 2023, all is not lost. There will likely be substantial growth in at least a few sectors of digital advertising. Connected TV (CTV), in particular, will see increased investment from advertisers this year, so much so that Insider Intelligence increased their CTV ad spending forecast by $3 billion to $26.92 billion between April 2022 and October 2022.
It would be perhaps a stretch to say that things look awesome, but neither is the boat on fire. We expect to see ad spend levels resurge in the 2025 range if the US officially dips into a recession, but there will always be opportunity to gain market share as pretenders vacate the market.
Image credit: This image was created by an AI with the prompt “show a trippy, dark, grungy image of a guy in a business suit sitting beneath a creepy tree with an apple falling to hit him on the head.”