Thanks to fluctuations and volatility, an advertising forecast released last month – or even last week – may no longer be an accurate barometer. Case in point: In a forecast preview last week, Borrell Associates said local advertising would grow 0.6% in 2023. But by the time it officially released its 2023 local advertising forecast this week, the number has been revised upwards by almost three points. Today, local media financial consultancy says total local advertising will grow by 3.2% next year. “We have new information that puts local spending at a much higher rate than we thought,” CEO Gordon Borrell said.
In other words, when evaluating ad forecasts these days, remember that they represent that particular moment in time.
Despite all these flows, one thing that hasn’t changed is that digital advertising (+7.7%) will continue to grow at a faster rate than non-digital advertising (-5.9%).
“When we look at local advertising and where the dollars are spent and just put them in two buckets – digital and non-digital – seven out of 10 dollars are now spent somewhere digital,” Corey Elliott, executive vice president of Borrell, Local Market Intelligence, said in a webinar Thursday. This is a dramatic shift from 2016, when 45% of local media ad spend was on digital and 55% on non-digital.
Among traditional media, radio is expected to see one of the smallest year-over-year advertising declines, down 2% in 2023. That’s a small potato compared to local TV, which should fall by 18.0% after a very robust year 2022, followed by directories (-8.7%) and newspapers (-7.1%).
Meanwhile, one of the biggest winners next year is digital audio, which is expected to see a 10.4% increase in local ad spend. Video streaming/OTT is poised to post the strongest growth (+12.6%) in stark contrast to local TV which is on track to see the biggest decline of any media channel.
Search, OTT video, targeted display advertising and listing sites are poised to become the top spend formats in 2023, according to Borrell.
Beyond its new ad spend forecast, Borrell’s latest data also analyzes retail sales which currently look strong. Elliott called 2022 “the best year we’ve had, hands down” for retail sales. “There’s a lot more business, there’s consumer spending, there’s inflation – all of those factors come into play.”
But each category of business has a different story to tell. Hardware stores saw a big spike in 2020 due to COVID, when millions of Americans decided to fix their homes. This trend continues today. But department stores collapsed in 2020 and are now experiencing something of a return to normal.
A similar trend is unfolding at new car dealerships. After a disastrous 2020, dealerships were “climbing high in 2021,” Elliott said, reaping big profits from inflated prices even with far fewer cars for sale on their lots. Based on recent sales figures, the automotive category looks slightly more encouraging today.
As Indoor Radio reported on Monday, one of the main drivers of retail sales is a massive influx of new small businesses. “That’s phenomenal growth,” Elliott said, noting that statistics from the U.S. Department of Labor, the Brookings Institute and the U.S. Chamber of Commerce have all backed it up.
Borrell Associates says the number of U.S. businesses with fewer than 10 employees has nearly doubled, while those with 25 or more employees have declined since March 2020. Additionally, 6.2 million “high propensity businesses” have been created since 2019. These are businesses the United States Census Bureau has designated to be more likely to succeed and grow. “Radio has a perfect story for them – if they want to be connected to the community and want their brands to gain awareness, and if they need help with marketing,” Borrell said.
Borrell’s data shows that these smaller companies are more likely to buy digital from traditional media companies. More than one in four (26%) buy digital from a radio station or radio company, compared to 31% who buy it directly from a platform.
However, these hordes of new ventures fly under the radar. Rather than trying to find them by buying business listings, a better approach may be to use the radio megaphone to get them out of the woodwork. More information on this strategy is available HERE.
Borrell’s numbers are based on ad spend, as opposed to media company revenue. And he’s not the only forecaster to revise his outlook more frequently. Magna Global said it changes its forecast regularly and will review its figures again in December.