Source: www.insideradio.com, September 2022
“I’m Still Runnin’ Against the Wind” – that’s the pithy prognosis for media and internet advertising for the rest of 2022 and into 2023, repurposed from Bob Seger by Wells Fargo. The firm’s analysts looked at how this and next year’s ad revenues changed as their models baked in a more recessionary ad environment during the last several months.
“Sometime during Q2, the macro picture changed as the war in Ukraine, high gas prices, nationwide inflation and a more hawkish Fed combined to make investors and marketers far more worried about economic recession,” the report says. You know what happened next. Bracing for tougher times ahead, the ad community pulled back on marketing spend.
To understand what changed, and by how much, analysts Steven Cahall and Brian Fitzgerald looked at a bunch of companies totaling some $500 billion in 2022 estimated revenue. The analysts examined revenue estimates before the change in the economic outlook and compared those estimates to where they settled after second quarter 2022 results.
Among the conclusions: “Overall, traditional ad channels were more resilient than digital,” Wells Fargo says. The best performing digital channels were search, with revenue estimates revised downward by -4% for 2022 and -7% for 2023 and ad tech (-2%/-4%). “But the most modest revisions were traditional channels with both TV networks and ad agencies revised downward -2% for 2022 and -3% for 2023.” In fact, when all traditional ad channels are combined (broadcast and network TV, radio, outdoor and agencies) the ’22/’23 revenue revisions totaled -2%/-3%. That’s significantly better than the rollup for digital channels (streaming/AVOD, digital audio, search, social, ad tech, specialty) which was -7% for 2022 and -11% for 2023. The total revision for all ad dollars in the analysis for ’22/’23 was -6%/-10%. Keep in mind these numbers refer to the percentage decline in the pre-second quarter forecast to the post-second quarter forecast, not year-over- year revenue changes.
When Marketers Feel Skittish
So why are advertisers pulling back more on digital than traditional channels? The report suggests digital’s shorter sales cycle is a major factor. “We think seeing these changes helps shape investors’ understanding of the complex advertising marketplace,” the report says. “For one, it shows what ad channels get turned down first when marketers feel skittish.” But instead of making pullback decisions based on efficacy or ROI, advertisers appear to be cutting “where they can or perhaps where they see less business disruption.” Connected TV, for example, is still in a testing phase with many advertisers, making it a ripe target. “Advertisers were looking to modify spend quickly. TV networks and out-of-home, for example, are harder to turn quickly,” the report concludes.
Audio falls right in the middle of the range of downward revenue revisions with digital audio doing better than broadcast radio.
