Monday, January 30, 2023

Solomon Partners’ perspective on trends in digital signage, OOH advertising and global ad spend: Media Monthly Report

Guest post by Mark Boidman,
Media & Entertainment Group Head, Solomon Partners

Thursday, January 12, 2023

The following excerpts are quoted from Solomon Partners’ Media Monthly Report, January 2023. 

SOLOMON’S PERSPECTIVE: TRENDS SHAPING THE DIGITAL SIGNAGE INDUSTRY

In the past decade, digital signage has  sprung to the forefront of the advertising industry for its  ability to dynamize content creation and exhibition, improve  customer experience, and boost sales and retention with  customers.

Digital  signage is any sort of electronic display technology that  can be used to transmit videos, images, webpages, and  other content.

A recent study cited that 60% of enterprises that  do not currently possess digital signage plan to implement  the technology within the next two years(a), and another  study expects global digital signage industry revenue to  reach $45.33 billion by 2030 (7.7% CAGR)(b).

Amid this growth, there are numerous underlying trends  and applications of digital signage that will continue to  define the sector as it rapidly develops. The initial trend is  the constant endeavor for businesses to connect better with  their customers.

With retailers aiming to improve the in-store  experience for consumers relative to competitors, many  have taken to digital signage as a medium to make orders or  purchases, interact with and learn about products, and drive  traffic toward specific items in stores.

According to recent  research, 76% of consumers say they have made a purchase  based on information they saw on digital signage(c), further proving the efficacy of digital signage in a retail context.

Another similar trend driving businesses toward digital  signage is the fight for customers’ attention and memory.

In a  world filled with a plethora of brands and sources of media,  and where the average consumer is exposed to thousands  of messages each day, the importance of choosing efficient  and effective advertising channels is greater than ever.

Digital out-of-home advertising provides brands the ability to target customers with pertinent messaging that can be  deployed programmatically.

According to a study, unaided  recall rates in digital out-of-home ads are 7 to 25% higher  than other forms of media such as TV and social media(d),  further demonstrating the power of digital signage to  generate fruitful, lasting messages.

Additionally, developments in technology more broadly  have further highlighted the capabilities that digital signage  will hold in society for years to come.

Advances such as  artificial intelligence and machine learning, application  programming interfaces (APIs), or even the revival of QR  codes have melded harmoniously with the advancement of  digital signage and helped make it more insightful, interactive,  and useful for both media owners and consumers.

(a) Mvix Digital Signage.

(b) Grand View Research.

(c) Popshap.

(d) The Drum.

SOLOMON’S BENCHMARKED 2023  ADVERTISING SPEND FORECASTS

Major advertising agencies such as GroupM, Magna,  and Zenith expect 2022 year-over-year US ad market  growth of 9 to 12% (~20% in 2021)(a), suggesting that  a much-discussed potential recession is not currently  impacting the advertising market.

Despite inflation, a  bear marketplace, and geopolitical tension, reaching  consumers and building brand awareness continue  to be high priorities for most businesses. Adjusting  for the impact of cyclical events, such as the 2022  FIFA World Cup and the US midterm elections, ad  spending in 2022 is projected to grow at a number  closer to 8%(a): a strong figure.

In 2023, where some recessionary fears have shifted,  the advertising market is still expected to grow from  3% to 6%(b), based on studies from Dentsu, GroupM,  Magna, and Zenith.

A recent study by Magna cited  economic uncertainty and third-party cookie blocking  as reasons it was reducing its growth forecast for  the 2023 ad market. However, Magna still forecasts  growth to be ~5%(c), suggesting ad market strength  despite those cited factors.

As 2022 transitions to 2023, we expect advertisers to  continue to shift ad spend between different mediums,  as advertisers spend their budgets as efficiently as  possible.

We continue to expect existing media trends  to accelerate– e.g., local television is slated to continue  to see decreases of more than 20%(c). Meanwhile,  search, short-form video, and CTV/ad-based video  on-demand should see large increases(c).

Out-of-home and cinema advertising, which have  been recovering steadily since the pandemic, are  also expected to grow into 2023. In 2022, out-of-home  spending grew by more than 21%(c) as society began  to return to its natural state of mobility and physical  traffic.

Magna expects out-of-home advertising spend  growth to continue into 2023, forecasting ~8%(c)  growth for the year in its revised forecast.

Select sectors driving ad spend are also expected  to continue post-pandemic recovery, including  entertainment, travel, betting, and automotive.  Meanwhile, Magna states that brands selling food, drinks, personal care and household goods are “especially at risk as [brands] are forced to increase product prices  and face the possibility of consumers trading down in favor of cheaper brands.”

(a) Consolidated 2021/2022 US ad forecast reports from Magna, GroupM and Zenith.

(b) Consolidated 2023 US ad forecast reports from Dentsu, GroupM and Zenith.

(c) 2023 Magna US ad spend forecast report.

Companies that can optimally balance a marketing budget amid multifaceted tensions  while simultaneously maintaining strong brand presence in a competitive market will  come out of a recession strongest.

Though overall growth rates are forecasted to be lower than 2022, research firms continue to predict overall ad  spending growth in 2023.

US ad revenue is expected to cross $300 billion this year for the first time as well as  reach over $900 billion globally(a).

External pressures are expected to change the advertising landscape, requiring  companies to use the most efficient marketing and advertising channels, including out of home media, in order to  reach prospective customers and build and maintain their brands.

  • US Advertising Sales Projected to Pass $300 Billion (adweek.com).
  • Consolidated 2023 US ad forecast reports from Dentsu, GroupM and Zenith.
  • (c) 2023 Magna US ad spend forecast report

Click the image below for full report:

Published on Thursday, January 12, 2023 at 6:32 PM

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