The news: July saw ad spending go through its worst monthly decline since July 2020. Ad spending contracted 12.7% year over year in July, per MediaPost and Standard Media Index’s US Ad Market Tracker.
- July 2020 ad spending itself was low, down 17.8% from the year prior as the tail end of the COVID-19 recession played out.
Why is this happening? Ad spending soared during pandemic-induced lockdowns because of increased screen time and new digital advertising channels, but a confluence of factors have caused the market to cool down.
- The first reason is simple: Lockdowns are over and people are returning to everyday life. That means less time on screens and more time out in public, which has given a boost to out-of-home (OOH) advertising and ads on non-visual platforms like Spotify.
- Rising inflation has caused businesses to reexamine spending and has also pushed consumers to spend less. There’s debate about whether the US is currently in a recession, but buyers don’t seem optimistic—70% of consumers say they think there’s currently a recession, per Brand Keys.
- On top of that, advertising norms have been shaken thanks to AppTrackingTransparency on iOS, a wave of privacy regulations, and the ever-delayed rolling out of third-party cookies on Chrome.
- With spending falling and no post-ATT solution for digital advertising in sight, the outlook is spreading nerves.
The spillover: Whether the decrease in spending is a “downturn” or just a stabilization, the impact on advertising and related industries is undeniable. Companies that overextended during the pandemic by increasing ad spend or headcount are now pulling back.
- Advertiser Perceptions reports that one in five marketers have cut their ad spending. Automakers, historically large advertising spenders, have instead put their money behind customer experience, prompting sweeping changes at ad agencies.
- Layoffs have hit nearly every sector touched by advertising, even as US employment rises overall. Big Tech companies had a series of brutal earnings reports that prompted Snap, Meta, Netflix, and others to begin layoffs.
- Publishers like The New York Times reported ad revenue drops in Q2, but it was saved by rising subscription revenues. Others weren’t so lucky: Gannett began mass layoffs that affected at least 13 news outlets across the country on Friday. Vox, Recurrent Ventures, and others have also slashed headcount as ad revenues dwindled.
What’s here to stay: The contraction has wounded many sectors of the ad industry, but has also revealed which pandemic shifts are here to stay.
- OOH ad spending will grow in 2022, but at a much slower rate than its digital counterparts, even as the world reclaims some normalcy from the pandemic.
- The post-ATT and third-party cookie landscape has given rise to new digital advertising channels. Influencer marketing has emerged as a cheaper alternative to traditional channels for Big Tech and many brands, though it has its own kinks to work out.
- Retailers from Michaels to Walmart have raced to launch retail media ad networks to tap into the still-growing pool of global ad spending. That same frenzy has come for streaming services, who are all rushing to launch ad-supported subscription tiers to meet consumers’ desire for cheaper subscriptions and advertiser demand for high-impact ads.
This article originally appeared in Insider Intelligence's Marketing & Advertising Briefing—a daily recap of top stories reshaping the advertising industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.