Digital ad revenue set to grow nearly 6% in 2023: report

GroupM is wrapping up 2023 with a big prediction for retail media: By 2028, retail media network revenue will surpass ad revenue in linear TV and CTV combined. That’s according to a new economic forecast the agency published Monday morning.

Overall, the agency is predicting digital advertising revenue to grow by about 5.8% this year, or $889 billion, excluding political advertising. That falls largely in line with the company’s previous predictions.

That growth, though, is expected to slow to 5.3% next year, GroupM predicts. Last week, Brian Wieser, a former GroupM exec who previously worked on its forecast, published his own forecast. The findings were relatively similar.

Despite the expectation for a slight slowdown in 2024, low global unemployment has “given us confidence around the fact that consumers have been able to continue spending this year and will be able to continue spending into next year, as long as we still have that job security,” Kate Scott-Dawkins, global president of business intelligence at GroupM, said during a press call about the findings.

But back to retail media. That growth prediction isn’t totally surprising. Advertisers have known it to be a buzzword, and recently, seemingly every brand, from Kroger to Uber, is using its audiences to sell ads. The report notes that the largest players in the retail media space are still Amazon and Alibaba. However, the category’s estimated revenue is 5% less than GroupM’s projection in June, dropping from $125.7 billion to $119.4 billion, due to sluggish retail sales in China.

The retail category is benefiting from a “kind of shift amongst advertisers to more direct relationships with their consumers,” Scott-Dawkins said. “The logged-in, consented data that retailers have is valuable, and that’s helping drive a lot of this, as is the nearness to the point of purchase.”

What else is in the forecast? Global digital advertising will close the year up 9.2%, reaching $616.8 billion, but is expected to fall to 7.3% in 2024. By 2028, digital advertising spend will surpass the size of the entire advertising industry in 2022.

Meanwhile, total TV revenue “will remain roughly flat,” growing just 1.1% on a compound annual basis over the next five years, GroupM predicts. If 30% of all CTV viewing time is ad-free both today and in 2027, the average available “ad hours” in the US will fall by 17%, according to a slide displayed during GroupM’s press presentation.

Where the money’s at: As advertising sellers, Google, Meta, ByteDance, Alibaba, and Amazon grew ad revenue by 25.4% on a compound annual basis from 2016 to 2022, GroupM found. Excluding those companies, who are by far the top five advertising sellers, the industry grew just .6% each year in the same timeframe.