Thursday, October 6, 2022

Netflix push into their streaming Ads could raise all AVOD ships

Dive Insight:

The U.S. advertising growth outlook for next year appears cloudy, a potentially unsurprising insight given ongoing challenges posed by inflation and a volatile economy. Enduring weaknesses in consumer packaged goods, retail and finance might be mitigated by gains elsewhere, and Magna still expects year-on-year growth in 2023, albeit at a lower figure than previous projections. Still, next year will not see the benefit of cyclical spending guarantors like the U.S. midterms.

Entertainment, which has been buoyed by the streaming boom and a return to movie-going last summer, could draw further interest with heavy hitters entering the AVOD space. Disney+ and Netflix, among the most popular streamers in the U.S., plan to launch ad-supported tiers in the months ahead, a prospect that has excited Madison Avenue even as some of the reported rates being asked have raised a few eyebrows.

Magna said the monetization push by Disney and Netflix could siphon off some budgets from existing AVOD players and linear TV, but ultimately serves to “grow the pie” by expanding the category’s reach and inventory after years of ad-free streaming’s dominance.

Retail media is another bright spot, with Magna believing the sector will command $42 billion in 2023 versus $31 billion this year. The researcher attributed a lion’s share of the gains to Amazon but noted that a number of other “larger retailers” are ramping up their bets. The report added that retail media networks are “mostly immune” to data-privacy challenges that are roiling social media platforms since retailers leverage their own first-party data to target and measure campaigns.

Social media posted meager 3% growth in 2022’s first half and is expected to grow just 4.4% for the full year in 2022, per Magna. Meanwhile, retail media now represents about 18% of digital advertising globally and 11% of total advertising spend, according to separate findings from GroupM.

On the traditional media front, OOH’s recovery has impressed, a sign that consumers are eagerly stepping back out into the world following the start-stop earlier years of the pandemic. OOH was the fastest-growing format in the year’s first half, jumping 30%.

Dive Brief:

  • Magna Global downgraded its U.S. advertising growth forecast for next year from 5.8% to 4.8%, a reflection of an uncertain economic picture and a dearth of major cyclical events.
  • The slowdown is not expected to be spread evenly, as categories like entertainment, travel and betting will continue to attract strong investment. Automotive could “possibly” rebound as well if the car market stabilizes, according to the media agency.
  • Regarding channel activity, Magna said advertising video on demand (AVOD) would grow ad sales 33% in 2023 to hit $6.3 billion as brands flock to new offerings from Disney+ and Netflix. Keyword search formats, including retail media, and out-of-home (OOH) media will maintain a hot streak while social contends with headwinds.

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