Digital ad spend slowdown set to persist until 2025

The days of fast-paced, double-digit percentage year-on-year growth in global digital advertising spend may be gone for good, a new forecast by Dentsu suggests. 

Why it matters

The industry has witnessed two decades of rapid market expansion for digital media. Dentsu figures show that digital ad investment growth has only dipped into single digits twice previously: in 2009, at the height of the global financial crisis, and again in 2020 during the Covid-19 pandemic.

However, Dentsu’s latest report predicts a 6.6% three-year compound annual growth rate (CAGR) in worldwide digital ad spend to 2025, with year-on-year decelerating from +7.8% in 2023 to +5.9% in 2025. It appears to confirm that digital media is nearing the top of its ‘S-curve’ and entering a period of slower, more steady growth. 

Exceptions to the rule

Despite the slowdown in investment with established digital ad formats like display (+7.3% in 2023, totalling $224.8bn worldwide) and search (+8.9%, $150.0bn), some parts of the digital ecosystem are seeing much higher rates of growth. 

As more inventory becomes available and technology improves, both connected TV (+22.3% three-year CAGR to 2025) and retail media (+20.4% three-year CAGR) are expected to markedly outpace the wider digital sector. 

Social spend is also forecast to maintain double-digit growth (+12.8% three-year CAGR), assisted by the adoption of social commerce and the popularity of short-form video platforms like TikTok and Instagram Reels.

Key quote

“We still expect global advertising spend to grow despite the economic uncertainty. However, media price inflation is the true driver of this increase and hides the more lacklustre reality: 2023 will be a flat year for ad spend” – Peter Huijboom, Dentsu.

Sourced from Dentsu