Advertising

The economy plays a big role in the advertising industry. When the economy is strong, companies have larger budgets for advertising, whereas during a weak economy, businesses scale back on their advertising efforts and advertising agencies in turn may reduce their staff and institute hiring freezes. The economy had been strengthening somewhat in the years after the recession in the late 2000s, then shrank by 3.5 percent in 2020 due to the pandemic, but is now rebounding. The U.S. Bureau of Economic Analysis reported a GDP increase of nearly 6 percent in 2021 and more than 2 percent growth in 2022. The advertising industry is likewise rebounding from the pandemic, with steady growth particularly in the digital advertising sector.

Overall, the U.S. advertising market had strong growth in 2022 compared to the previous year, growing by 8 percent. Spending on elections, such as political advertising, and sporting events contributed to this growth, which totaled to $318 billion. The spending on political advertising alone in 2022 was 66 percent higher than it had been for the previous midterms, generating more than $7 billion in net ad revenue for media owners, according to a report by research group Magna.

Global social media advertising sales experienced slow growth, however, in 2022, about 4.4 percent over the previous year. From 2019 through 2021, this sector had high growth rates that ranged from 20 to 35 percent. The reasons contributing to recent sluggish growth include increased competition in this sector and challenges that have arisen with adapting data to monetize vertical video formats on Instagram, TikTok, and YouTube.

Retail media has also increased in recent years, offering more opportunities for companies to earn advertising revenue. For example, Amazon had more than $11 billion in advertising revenue in late 2022, a 19 percent increase from the same time period in 2021, and Walmart’s Connect business raked in $2.7 billion in 2022, per a PricewaterhouseCoopers (PwC) report. Another trend to note is the growth of the games advertising market, which was reported at $54 billion in 2021. Consumer spending on video games has slowed down since post-pandemic recovery but U.S. gaming advertising spending continues to grow. From 2021 to 2022, game advertising revenue rose by 7 percent, according to an eMarketer report. It’s still early days in this sector, though, and advertising agencies and brands are exploring ways to fit into the gaming community. As of 2022, the total advertising spend on video games in the United States was $8.6 billion, a small amount when compared to its spend of nearly $57 billion on social media, more than $67 billion on video, $68 billion on linear TV, and nearly $19 billion on connected TV.

In 2021, digital advertising spending was more than $522 billion and was expected to exceed $567 billion in 2022. The research company Insider Intelligence reported that Google and Facebook are the top two companies in the digital advertising sales market. These companies generated the following worldwide net advertising revenue in 2022: Google, $168.4 billion; Meta (Facebook), $112.68 billion; Alibaba, $41.01 billion; Amazon, $37.99 billion; and ByteDance (owner of TikTok), $29.07 billion.

The U.S. healthcare advertising market was valued at more than $22 billion in 2022. Healthcare advertising has grown in recent years thanks to the development of electronic health records, telemedicine, and remote medical monitoring. Many healthcare providers adapted technology to meet the need for remote medical care during the pandemic, and this trend continues. At-home lab testing has also grown, providing another avenue for pharmaceutical advertising. Healthcare organizations have increased advertising spending on TV, print, and social media platforms. People now have more access than ever before, both online and offline, to information that can help them with health questions and concerns, such as information about medical conditions, procedures, available treatments, and medical providers. In 2022, the pharmaceutical companies that spent the most money on advertising were Pfizer, Johnson & Johnson, Roche, AbVie, Merck, Novartis, BMS, AstraZeneca, Abbott, and Sanofi.

Online advertising, and in particular behavioral advertising (or digital consumer profiling), continues to cause debate among regulators, marketers, and consumers. In 2019, Massachusetts Senator Edward Markey introduced the Privacy Bill of Rights Act, to protect individuals' personal information and regulate the collection and use of this personal information. The data that advertisers collect is usually anonymous. Still, one form of protection is the opt-out laws that have been in place for years, giving consumers a way to reduce the number of unsolicited e-mails (as well as phone calls and mail) they receive. The Federal Trade Commission actively researches and reports on advertisers’ online tactics, forming recommendations for privacy protection for consumers. In Advertising and Marketing on the Internet: Rules of the Road (https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road), a best-practices guideline to remind advertisers of the laws it enforces, the FTC states: “The Internet is connecting advertisers and marketers to customers from Boston to Bali with text, interactive graphics, video and audio. If you’re thinking about advertising on the Internet, remember that many of the same rules that apply to other forms of advertising apply to electronic marketing. These rules and guidelines protect businesses and consumers—and help maintain the credibility of the Internet as an advertising medium.”

In 2010, the FTC issued a report proposing that “Do Not Track” be a constant setting on Web users’ browsers: Users can click on the setting to block advertisers from tracking their online activities and from using cookies to create targeted ads. In 2011, Mozilla’s Firefox was the first to adopt Do Not Track technology, followed by Microsoft’s Internet Explorer (IE9) and Apple’s Safari. Google has also incorporated the Do Not Track option to its Chrome browser, enabling users to turn off tracking through its privacy settings. To date, the FTC continues to provide guidelines for Do Not Track, and privacy groups continue to take issue with Do Not Track because it leaves a lot of room for interpretation; it’s a recommendation, not a law. Ad agencies and other groups that belong to the Digital Advertising Association have promised to stop using tracking data, but they haven’t promised to stop tracking Web users’ activities. In 2020, the Global Privacy Control initiative was introduced at a Web consortium; GPC enables users to choose privacy preferences through a browser-based opt-out tool or mechanism. To date California is the only state that requires companies to comply with GPC, and a growing number of companies support the GPC initiative.

The top technology (and technology-related) advertisers continue to watch include the continued growth of the smartphone, with video no longer being the exclusive domain of the television display or the personal computer. More people have embraced the cloud, accessing their music through streaming services like Pandora and Spotify, and finding videos through Netflix and Hulu Plus via game consoles, stand-alone devices such as Roku, or apps installed on connected TVs. The use of connected TV devices continues to grow, enabling advertisers to target products and messages directly to specific audiences, which is optimizing advertising expenditures and increasing revenue. Companies have caught on that they need to have a Chief Data Officer (CDO) on staff to identify and organize the massive amount of information that’s being captured on consumer behavior from multimedia, social media, enterprise, and location-based platforms. Corporations in a variety of fields will need a CDO to not only manage data, but to also create and manage a staff of highly trained analysts.

Forbes Agency Council, a closed group of advertising, creative, public relations, and media strategy executives, discussed its insights in a 2023 article on the top trends that advertisers are paying attention to recently. A diversified and growing gaming audience is at the top of the list, with more than 3 billion gamers worldwide using mobile devices, consoles, and personal computers to game. Advertisers are now exploring various, creative ways to connect with and engage gamers. Search engine marketing is another area that advertisers are focusing on, as Gen-Zers are turning more to TikTok than Google for their searches. Advertisers are also paying attention to advertising opportunities on other social media platforms also, such as Twitch, Reddit, BeReal, and Supernova. Creating value-added content that appeals directly to consumers will be key. More emphasis is also being paid to building better brands and recognizing the importance of creators. As one advertising executive described it, "Brands need to focus on being a source of value for their customers in order to retain and extend lifetime value. Especially in tough economic times, you need to stay in the good graces of your client base.” An example of this strategy was Airbnb, which changed its approach from direct-to-consumer advertising to “a strong brand-marketing pull.”

Personalization in advertising continues to trend and artificial intelligence (AI) now influences many aspects of people’s lives. Consumers expect this personalization from the brands they use and are interested in, and research studies have shown that many people switch brands when personalization is lacking. Conversational marketing is also on the rise, enabling companies to connect with consumers on a more personal basis through various channels, such as through virtual assistants (or chatbots), digital employees, or intelligent assistants. Per the Forbes Agency Council: “Brands have to deliver personalized, omnichannel experiences to survive in today’s environment, which is why they’re pushing forward with AI spending and integrating it into their customer experiences. AI can do the ‘heavy lifting’ of agile product and development to deliver highly relevant content to consumers.”