GroupM's latest 'This Year Next Year' report paints a mixed picture for the advertising industry, forecasting a global ad spend growth of 5.8% in 2023, which is expected to decelerate slightly to 5.3% in 2024. However, in Australia, the outlook is less rosy, with ad spend growth predicted to remain flat at 0.2% in 2023, rising marginally to 0.9% in 2024.

On a global scale, ad spend in 2023 is estimated to reach $889 billion, excluding US political advertising. This is then expected to decelerate in 2024 to 5.3%. By 2028, it's expected to tip $1.2 trillion.

Pure-play digital ad spend, excluding digital extensions of out-of-home and CTV, for example, is expected to grow 9.2% in 2023, up from GroupM's initial 8.4% forecast, to hit $616.9bn. It's then forecast to reach $662.2 billion in 2024. By 2028, pure-play digital is projected to be larger than the entire advertising industry was in 2022 at $879.9bn.

Retail media meanwhile, added more than $10 billion in revenue in 2023 and forecast to grow 8.3% in 2024 to reach revenue in 2023 of $119.4 billion. The report authors said by 2028, retail media revenue is expected to exceed that of linear TV and CTV combined, reaching nearly $175bn (whole-of-TV: $168.3bn).

The largest retail media platforms, by e-commerce gross merchandise value (GMV) in 2022, were Alibaba ($1.19bn), Amazon ($654.2m) and JD.Com ($533.6m). These three were twice the size of the next 17 players combined. On a compound annual basis from 2016 to 2022, the e-commerce GMV of DoorDash grew the fastest at 126.3%, albeit from a small base. Pinduoduo, parent company of Temu, which has advertised heavily in international markets, also grew 88.9%.

Television, including CTV, is the third largest major channel for global ad revenue, behind search and other digital channels, fell to 17.9% of the total in 2023. Of this, CTV represents $29.2bn in 2023 and is expected to reach $45.8bn in 2028. By contrast, Linear TV will see a -1.3% CAGR through 2028, the report stated. This year, traditional TV is forecast to be worth $130.2 billion, then dip to $126.3bn billion in 2024.

All of Out-of-home (OOH) is forecast to grow 10.3% in 2023 to hit $34.4bn, although GroupM said it will not surpass 2019 levels until 2024. As it currently, stands, OOH is not expected to regain its pre-pandemic share of total ad revenue even by 2028. Digital out-of-home revenue in 2024 is expected to reach $14.2bn worldwide thanks to 14.6% growth next year. In 2023, DOOH is expected to grow 18.1% and be worth nearly $12.4bn.

"The top five global sellers of advertising—Google, Meta, Bytedance, Alibaba and Amazon—have used artificial intelligence, addressability and a focus on self-service platforms to grow advertising revenue 25.4% on a compound annual basis from 2016 to 2022," the report authors stated. Meta is projected to generate $130bn in ad revenue in 2023, making up 14.6% of total global ad revenue. However, not all digital giants are faring as well. The report predicts a revenue fall of more than 50% for X (formerly Twitter) in 2023, dropping it out of the top 25 global ad sellers.

For most of that period, traditional media owners, large brand advertisers and agencies were slower to transition, the report continued.

"Now, however, we seem to have reached a significant inflection point in the realization that linear TV is well and truly in decline, growth in advertising is dominated by a handful of large media and commerce companies, and the economics of this industry are predicated on this new world order, where large advertisers and agencies make up a minority of revenue for some of their largest partners," the report authors stated.

In the audio space, total ad spend is expected to reach $26.4bn, representing a -2.9% dip on 2022. In 2024, audio is forecast to return to slow growth, reaching $26.5bn, then dip again in 2025 by -0.6%. By 2028, GroupM is estimating audio ad spend to only sit at $26.2bn, representing 2.2% share of total spend. However, streaming audio is expected to grow 11.7% in 2024, led by Spotify, which reported 30.7% year-on-year growth of ad supported monthly active users in the first three quarters of 2023, and 31.8% growth in ad supported revenue on a constant currency basis. 

The report underscores the impact of higher living costs and inflation on multiple sectors, including retail, and anticipates cautious consumer spending leading into 2024. This caution is reflected in the Australian ad spend predictions.

"Despite significant economic pressures, we anticipate 2023 will deliver a broadly flat year for the industry, but there have been key events driving growth," GroupM Australia's Chief Investment Officer, Melissa Hey, commented from an Australian perspective. "The enduring popularity of VOD services, the 'Barbieheimer' effect on cinema, and the strength of the out-of-home market provided pockets of growth, while social continues to perform and new entrants in the retail media space are accelerating growth."

GroupM's report also noted shifts in the rankings of tracked markets, with the UK replacing Japan in the number three spot due to the weakening of the Japanese yen and revised market expectations. Australia, despite its flat growth, remains the 10th largest market for ad revenue. The US and China remain the two largest markets in terms of ad revenue.