US Advertising Market Outlook for the Rest of 2024 By Investing.com

The US advertising market is poised to show remarkable strength, with an estimated growth rate of 9.4%, up from 4.5% in 2023, according to analysts at Morgan Stanley.

This expansion is fueled in large part by digital media and performance-based advertising, which are transforming the landscape by pushing brands toward measurable, bottom-of-the-funnel strategies.

As the economy continues its uneven recovery, advertisers are leaning heavily on channels that can deliver tangible returns, such as search, social media, retail media and connected television (CTV).

The shift to digital has been seismic, with around 75% of the US advertising market now falling into digital channels.

This transition is primarily driven by the increasing dominance of e-commerce, retail media and performance advertising on digital platforms.

Brands focus on driving conversions through highly targeted campaigns where ROI can be directly measured, pushing ad dollars further into digital ecosystems.

One of the key drivers of this performance-driven push is retail media, a category that has exploded in recent years with the rise of e-commerce.

Retail media networks, powered by giants like Amazon (NASDAQ: ), are thriving because they give advertisers the opportunity to target consumers closer to the point of sale.

This trend is complemented by the rise of connected TV, which has also seen tremendous growth over the past few years, although the sector is expected to experience some deceleration in the second half of 2024 due to tough year-to-date comparisons per year.

Despite the remarkable expansion in digital, some traditional media are struggling. “Linear TV advertising, excluding sports, continues to post healthy secular declines,” analysts said

Cable networks and terrestrial radio also face headwinds as more advertisers shift their budgets to digital platforms.

While political ad spending in the second half of 2024 is expected to provide some support, these sectors are not expected to experience a long-term recovery.

At the same time, outdoor advertising is also seeing a revival. “We see this deceleration particularly in the CTV market, while late-cycle media such as OOH are still expected to deliver accelerated year-on-year growth in 2H24,” the analysts said.

In digital, the tech giants continue to lead the charge. Meta (NASDAQ: ) and Google (NASDAQ: ), two of the biggest beneficiaries of the shift to performance-based advertising, have shown impressive growth.

Meta, in particular, is leveraging its AI investments to improve ad performance on its platforms. Through innovations such as a unified video recommendation service and improved ad personalization,

Meta is seeing increased engagement on platforms like Facebook Reels and stronger return on ad spend for US advertisers. Google (NASDAQ: ), meanwhile, remains resilient in search advertising, particularly in categories like retail and financial services, further solidifying its position as a key player in the advertising ecosystem.

Amazon, while still a dominant force in the digital ad market, has faced some challenges with its CTV offering, which has taken off more slowly than expected.

However, Morgan Stanley remains bullish on its long-term outlook, particularly regarding future increases in ad load expected in the fall during major events such as the NFL football season and the holiday shopping period.

Although the US advertising market is poised for strong growth, some upstart media outlets, particularly CTV, may experience a slowdown in the second half of the year.

This deceleration comes as the market overcomes favorable comparisons from late 2022 and early 2023. Despite this, end-of-cycle media such as retail and political advertising are expected to take pace, ensuring that overall market performance remains healthy.

Beyond digital and broadcast media, the broader digital transformation offers mixed results.

While business and digital transformation services are vital for brands adapting to today’s market, they also create challenges for traditional advertising agencies, particularly in sectors that focus more on IT services than marketing.

This shift has hurt the growth of agency holding companies, even as media spending remains strong.

Among individual companies, Omnicom is particularly well positioned to benefit from current trends.

With recent account wins and exposure to the fast-growing retail media segment, Omnicom (NYSE: ) is expected to post organic revenue growth of about 10% in 2024 and potentially more in 2025.

In contrast, Roku (NASDAQ: ), despite being a key player in the CTV space, faces challenges from increased competition and concerns about its ability to grow platform revenue as expected.