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News | TikTok expected to escape the worst of the global ad slowdown

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TikTok expected to escape the worst of the global ad slowdown

507 Views / News Story by Advert On Click / 7 December 2022
TikTok expected to escape the worst of the global ad slowdown

Other big social media groups forecast to lose market share to viral video platform

TikTok is the only big social media platform to significantly increase advertising revenue this year, according to an industry estimate, highlighting the economic chill gripping the online ad market.

Advertising spend on social media has grown just 4 per cent this year, according to Magna, part of IPG Mediabrands, down from 36 per cent in 2021. The agency said it expects ad spending on social media to climb 7 per cent next year.

A separate report on Monday published by GroupM, the media buying agency owned by WPP, estimated that TikTok doubled its advertising revenue in 2022, hitting rivals Meta and Snap as the Chinese social media giant took a larger share of the market.

Last month, the FT reported that TikTok had cut its global revenues forecasts for this year, a sign that the company was not immune to the pressure facing competitors even though it is still growing.

“A more competitive environment and data headwinds have dramatically slowed the amount of new money flowing into social media this year,” said Luke Stillman, a senior vice-president at Magna. “Looking forward, consumers have gravitated towards short vertical video formals and advertisers are focusing on those.”

Magna’s forecast revised down growth in total spending on traditional and digital advertising by 1.5 percentage points to 5 per cent for 2023, significantly lower than the 7 per cent growth rate in 2022.

GroupM also revised its 2023 forecast for total ad spending growth down 0.5 percentage points to 5.9 per cent.

One bright spot in the global advertising market was US political spending during the midterm elections, which almost doubled to $13.6bn compared with the previous midterms year — 2018 — according to GroupM. Two other events that boosted advertising globally this year were the Beijing Winter Olympics and the Fifa World Cup in Qatar.

A significant drag on advertising growth this year came from the Chinese economy, which economists at Nomura estimated will grow at just 4 per cent next year as the toll from the country’s strict zero-Covid policy continues to weigh on consumer confidence and restrict key supply chains.

Magna and GroupM both forecast that the Chinese advertising market will grow between 6 and 7 per cent next year as Covid restrictions ease and the government prioritises economic expansion.

“We’ll see where the current protests go but we are expecting measures . . . boosting the economy again and we are expecting growth out of China”, said Kate Scott-Dawkins, Global Director of Business Intelligence at GroupM.