High inflation in the country and international economic instability affected ad spending in the main vehicles
The escalation of inflation in the United States, which in July reached the highest level since November 1981, is leading to a slowdown in the country’s advertising market. The increase in prices affects the population’s consumption capacity and, consequently, leads companies to reduce their investments in advertising.
During the presentation of the 2nd quarter results, the CFO of Warner Bros. DiscoveryGunnar Wiedenfels, said the sector’s earnings have shrunk. “Given the less favorable macro environment, we are seeing weaker demand in the dispersion market”said the executive in reference to the model in which TV ads are contracted close to the air date.
The 6% reduction in advertising revenue was also decisive for the result of the TV operations of paramount in the 2nd trimester. The company controls the channels CBS, MTV, Nickelodeon and Comedy Central.
In the same vein, on August 3, the New York Times Company reported its 1st drop in digital advertising revenue since 2020.
Although the results show a slowdown in the sector, some market analysts expect ad spending in 2022 to remain high. For the GroupMa media investment firm, global ad volume is expected to grow 8.4% for the year to $837.5 billion.
In an interview with journalists, the president of the media company, Brian Wieser, justified his projection with the growth registered in the 1st half of this year compared to 2021. According to him, the high was 2 digits, but it should be “a little softer” in the 3rd quarter.
Advertising drove $7.1 trillion in US sales activity in 2020, according to a 2021 study by IHS Markit for the Advertising Coalition — a group of media companies and national trade associations. Also according to the research, every dollar spent on advertising in the US in 2020 resulted in about $21 in sales activity. Here’s the intact (712 KB).
In times of crisis, advertising spending is among the first to be cut. In late July, media giants such as Goal and the alphabetwhich posted rapid growth last year, blamed the drop in ads for their poor quarterly results.
Alphabet – Google’s parent company – reported the slowest quarterly sales growth in 2 years. With high inflation and low demand, YouTube ads were heavily affected.
“It looks like we have entered an economic crisis that will have a broad impact on the digital advertising business.”, said Chief Executive Mark Zuckerberg in the presentation of the results.
At the same time, according to Washington Posta Netflix and the Disney+ prepare to run ads on their platforms. In the case of Disney, advertising should be available as early as this year. The change in the Netflix service should be for 2023.
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