The US advertising market is expected to show remarkable strength, with a projected growth rate of 9.4%, up from 4.5% in 2023, according to analysts at Morgan Stanley.
This expansion is largely supported by digital media and performance-oriented advertising, which is transforming the landscape by pushing brands towards ultimately measurable strategies.
As the economy continues its uneven recovery, advertisers are increasingly relying on channels that can deliver tangible returns, such as search, social media, retail media, and connected TV (CTV).
The shift to digital has been seismic, with nearly 75% of the US advertising market now located in digital channels.
This shift is primarily due to the increasing dominance of e-commerce, retail media, and performance-based advertising across digital platforms.
Brands are focusing on driving conversions through highly targeted campaigns, where ROI can be directly measured, pushing ad dollars further into digital ecosystems.
A key driver of this performance-based push is retail media, a category that has boomed in recent years alongside the growth of e-commerce.
Retail media networks, backed by giants like Amazon (NASDAQ:), are booming because they give advertisers the opportunity to target consumers closer to the point of sale.
This trend is complemented by the rise of connected TV, which has also seen tremendous growth in the past few years, although the sector is expected to experience some slowdown in the second half of 2024 due to difficult year-to-year comparisons.
Despite the significant expansion in the digital space, some traditional media outlets are suffering. “Linear TV advertising, excluding sports, continues to see healthy declines globally,” the analysts said.
Cable networks and terrestrial radio stations are also facing headwinds as more advertisers shift their budgets toward digital platforms.
While political ad spending is expected to provide some support in the second half of 2024, these sectors are not expected to see a long-term recovery.
Meanwhile, outdoor advertising is also seeing a recovery. “We see this slowdown most notably in the connected TV market, while lagging media such as outdoor advertising is still expected to see accelerated year-on-year growth in the second half of 2024,” the analysts said.
In the world of digital technology, the tech giants continue to lead the way. Meta (NASDAQ:) and Google (NASDAQ:), two of the biggest beneficiaries of the shift to performance-based advertising, have shown impressive growth.
Meta, in particular, is leveraging its investments in AI to improve ad performance across its platforms. With innovations like unified video recommendation and enhanced ad personalization,
Meta is seeing increased engagement on platforms like Facebook Reels and stronger return on ad spend for advertisers in the U.S. Meanwhile, Google (NASDAQ:) has remained resilient in search advertising, particularly in categories like retail and financial services, cementing its position as a major player in the advertising ecosystem.
Despite being a dominant force in the digital advertising market, Amazon has faced some challenges with its connected TV offerings, which have rolled out more slowly than expected.
However, Morgan Stanley remains optimistic about its long-term prospects, especially with expected increases in advertising volume in the fall during major events such as the NFL season and the holiday shopping period.
Although the U.S. advertising market is expected to see strong growth, some early-cycle media, particularly CTV, may see a slowdown in the second half of the year.
This slowdown comes as the market moves beyond the positive comparisons from late 2022 and early 2023. However, late-cycle media such as retail and political advertising are expected to pick up the slack, ensuring that overall market performance remains healthy.
Beyond digital and broadcast media, the broader digital transformation is yielding mixed results.
While business services and digital transformation are essential for brands adapting to today’s market, they also create challenges for traditional advertising agencies, especially in sectors that focus more on IT services than marketing.
This shift has impacted the growth of agency holding companies, although media spending remains strong.
Among individual companies, Omnicom is particularly well positioned to take advantage of current trends.
Omnicom (NYSE:) is expected to see organic revenue growth of about 10% in 2024 and possibly more in 2025, driven by new account wins and exposure to the fast-growing retail media segment.
Conversely, Roku (NASDAQ:), despite being a major player in the CTV space, is facing challenges due to increased competition and concerns about its ability to grow platform revenue as expected.
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