Dentsu expects price inflation to drive ad spending growth in 2023, with a better-than-expected performance in the first of the year leading to a revised forecast for Canada.
However, the holding company also expects levels of digital spending – the biggest growth driver both here and globally – to normalize after years of massive expansion.
Canada’s ad market is projected to grow by 2.2% to $10.5 billion USD this year, an upgrade from the 1.5% growth Dentsu predicted in December. The rosier outlook comes as a result of a strong 8.7% increase expected for the first half of the year, though that pace is forecast to decline by 3.9% in the second half. Digital media, retail media, video and gaming is predicted to continue to lead growth into 2024, though it will normalize to 1.2% for 2024.
The Canadian forecast is only slightly behind the rate of growth for the global ad market, which Dentsu expects to be 3.3% in 2023, though that is down slightly from 3.5% it predicted in December. In the U.S., growth is expected to be 2.6%, which is also down from December, when it was predicted to be 3.8%. Unlike Canada, however, global growth for 2024 is expected to climb to 4.7%.
Dentsu also points out that media price inflation is the main driver of the growth; excluding the impact of inflation, global ad spending is forecast to be flat at a 0.6% decline.
Digital is the main driver of the overall growth in the Canadian market, capturing a 61.2% share of total spend thanks to increases in online video and retail media. However, digital growth is expected to slow to 4%, compared to 8.9% in 2022 (global digital growth is expected to be 7.8% for 2023, which Dentsu points out is only the third time it has been in single digits in the last two decades).
Although broadcast TV continues to dominate the total TV spend in Canada with a 76% share, it is expected to decrease by 3.9% in 2023 due to the shift towards connected TV and online video.
The growth in both retail media and connected TV comes as the channels mature in the Canadian market. Dentsu expects the shift to connected TV to continue as more players enter the ad-supported streaming space and expand available ad inventory – specifically pointing to FAST platform Pluto TV (which launched in December), as well as ad-supported subscriptions from Netflix (which Canada was among the first to receive) and Disney+ (which has yet to launch locally). On the retail media front, the likes of Loblaw and Walmart are leading the market, but players like Canadian Tire and Best Buy have started to get their own offerings off the ground.
