Global advertising spend is expected to grow by 3.3% in 2023 with inflation driving the increase to reach $727.9 billion, according to the latest Dentsu Global Ad Spend Forecasts report.

This boosted ad spend is being driven by major sporting events such as the UEFA Euro Championship and the US presidential election.

Dentsu also expects stronger growth ahead with 2024 global advertising market now expected to increase by 4.7% to reach $762.5 billion, with a further 3.8% growth in 2025.

Although the Dentsu report points to continued growth in 2023, the forecast has been adjusted marginally downwards from the 3.5% predicted in the December 2022 report.

The growth, however, has been driven by media price inflation rather than increased advertising volume.

Advertising spend continues to fall for print (-4.8%) whereas other media channels are ‘holding ground’ with incremental year on year increases for out-of-home (+3.8%), cinema (+2.1%) and audio (+0.8%).

DIGITAL PROVES TO BE A WINNER

Digital spend is expected to reach $424.3 billion by the end of 2023, accounting for 58.3% of all advertising spend, this will increase further to 59.1% share in 2024 and 60.3% in 2025.

Emerging digital categories are expected to continue to experience high growth in 2023, such as retail media (18.0%) and connected TV (15.2%).

The preference for programmatic buying is also on the up, with advertising spend transacted programmatically forecast to increase by 14.4%, to reach 71.4% share of digital spend in 2023.

Analysts at Shore Capital have picked five stocks to ride the global ad spend recovery including: WPP (WPP), Mission Marketing Group (TMG), STV (STV), Pebble Group (PEBB) and Ebiquity (EBQ).

Shore Capital believe these stocks ‘offer particularly significant valuation upside potential.’

WPP and Mission Group have ‘deep digital marketing skills’, STV ‘encompasses fast-growing production and VOD operations’, Pebble provides ‘digital commerce, products and services’ and Ebiquity ‘plays a key role in helping brands evaluate their spend and a range of other challenges’.

Year-to-date these companies’ share price performance have been a mixed bag.

Mission Group’s shares are up 12% to 50p, STV’s shares are down 5%, Pebble Group’s shares are up 3% to 93p and Ebiquity’s shares are down 2% to 48p.

WPP ISSUED STRONGER THAN EXPECTED GUIDANCE

WPP’s shares are up 5% to 879p year-to-date, the advertising group issued stronger-than-expected guidance for 2023 and a big-dividend increase.

The group also reported a pre-tax profit for the full year ending 31 December 2022 of £1.6 billion a rise of 17.3% compared with the same period last year of £1.37 billion.

WPP has been lifted by its recent transformation programme which generated gross annual savings of around £375 million against a 2019 base are ahead of the planned £300 million, with savings in property, procurement and ways of working, enabling additional investment in talent for growth areas.

WPP is forecast to report adjusted pre-tax profits of £1.7 billion for 2023, £1.86 billion for 2024 and £1.98 billion for 2025, according to analysts at Shore Capital. 

STV SEES 2023 AS A BREAKTHROUGH YEAR

Scottish free-to-air broadcaster STV recently reported a 11% rise in pre-tax profit of £22.2 million for 2022, however it warned of a 15% fall in total advertising revenue (TAR) for the first quarter of 2023.

But Shore Capital analyst Roddy Davidson remains positive despite its recent set of results.

'STV has made 'strong operational and strategic progress and continues to execute its diversification strategy. Notable features include: the continuing development of STV Studios and the STV Player VOD platform and, notwithstanding macro headwinds and tough comps, a resilient advertising revenue performance and record profits,' says Davidson.’

STV is forecast to report adjusted pre-tax profits of £21.1 million for 2023, £23.7 million for 2024 and £26.1 million for 2025, according to Shore Capital.

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