U.S. advertising market to hit $326B in 2023, bolstered by AVOD, retail media

U.S. advertising revenue is expected to reach $326 billion this year, as ad-supported streaming and retail media networks continue to grow, according to a new market forecast from Magna.

This marks a 3.4% increase from $315 billion in 2022, but slightly lower than the 3.7% growth rate Magna predicted in its forecast from December.

The AVOD and free ad-supported streaming TV (FAST) market will likely rise 21.2% in 2023. Magna noted the expansion of AVOD and FAST – particularly with Netflix and Disney’s ad-supported launches – has allowed brands to reconnect with demographics that are “increasingly hard and expensive to reach” through linear TV.

On that note, linear advertising formats are expected to decline 4% in 2023 with linear ad sales dropping 5%, as Magna said that format is “more vulnerable” to the uncertain economic environment. The cross-platform national long-form video advertising market, which spans linear, AVOD and FAST channels, is expected to dip 1% to $43.8 billion.

As for retail media, Magna projected ad revenue in that segment to reach $41 billion in 2023, a 15% year-over-year increase bolstered by the rise of e-commerce. Advertisers and retailers like Walmart are honing in on shoppable TV to further interact with viewers on streaming services.

Vincent Létang, Magna’s EVP of global market research and author of the report, noted retail media networks “are redirecting billions of marketing budgets dollars into advertising formats.” That, along with the increase in ad-supported streaming, fueled ad spending growth in the second half of 2022, “despite economic uncertainty, war, inflation, and very high growth comps.”

“In a similar economic climate, ten or twenty years ago, the U.S. advertising market would almost certainly fall off a cliff,” he said in a statement. “Things are different in 2023 because of media innovation fueling marketing demand. The organic drivers that boosted the ad market in 2021 and the first half of 2022 are still around and mitigating the impact of stressful economic signals.”

Magna lowered its overall advertising outlook due to “mixed economic signals” such as slow GDP growth and receding inflation. At the same time, the firm noted “financial turbulence is generating anxiety among consumers and businesses.”

Additionally, the U.S. ad market will be impacted by a lack of cyclical events, such as political elections and international sporting events. Magna pointed out there is roughly $7 billion in cyclical ad spend from even-numbered years “which doesn’t exist in 2023.”