You’ve probably experienced at least one recession if you are over 30 (not counting the man-made disaster caused by COVID-19 panic, its attendant shutdowns). These periods of economic contraction can bring about certain events. The current economic situation is not being called a recession by the White House. However, it is clear that individuals and businesses are suffering from the rising interest rates and crushing inflation. They are also changing their behavior.
CEOs have been preparing for a recession by putting down the hatches. This almost always follows an increase in interest rates…which almost always follow inflation…which almost always followed dumping trillions more dollars into the economy… I think this is predictable. Another predictable sign of recession is now in full swing: companies are increasing their advertising budgets.
According to The Hindu, an excellent English-language newspaper published in India, “Google’s revenue growth in the last quarter slowed to its slowest pace for two years as advertisers cut back on spending amid growing fears of economic recession.” Slower growth rates are not necessarily a sign of contraction but they are definitely a sign that things have been heading in the wrong direction. Google parent Alphabet’s April June revenue increased by 13% compared to last year. This is a great deal, especially when you consider the 62% increase in the previous year.
Alphabet’s slower growth in revenue was reflected in lower advertising sales. CNBC reports that advertising revenue rose only 12% to $56.3billion as marketers cut back on spending to control inflationary pressures. “The YouTube division saw the most significant deceleration, with sales rising 5% after jumping 84% a year earlier.” Google’s Q2 target of $56.3 billion was missed by $380 million ($56.29 million actual versus $56.67 million projected), after it fell short by $100 million.
Digital ad sales are not the only ones suffering. MediaPost reports that TV advertising could drop by almost 10% and 5%, respectively, this year.
According to MoffettNathanson Research, there is a strong chance that the recession will start before the end of the year.
If there was no recession, the total TV advertising budget would increase 6% to $86 Billion — up from $81 Billion in 2021.
MoffettNathanson projects that a potential recession would start this fall and last for five quarters. This would translate to a further 5% drop in TV advertising revenue to $74 billion next year.
These projections show that TV will not recover until 2024, a Presidential election year. The Olympics and political advertising revenue would help to boost TV’s performance.
According to the same article, digital advertising in the United States will continue to grow through the period. However, the recession expected to hit will reduce it to below what it should be to 5% this year, and 6% next year — not keeping up with the still-inflationary pace.