According to a report by eMarketer, digital advertising will face another turbulent year. Macroeconomic conditions continue to deteriorate, with advertisers reducing spending on some channels more than others. Meanwhile, privacy enforcement is heating up, but advertisers aren’t prepared for new legislation. Big changes in content moderation could result from US Supreme Court decisions. And Amazon’s competitors in the retail media space are beefing up their offerings.
I. Digital Ad Spending
Advertisers are scrutinizing their budgets.
Advertisers are scrutinizing their budgets.
With inflation driving up operating costs and a potential recession looming, marketing is getting deprioritized. eMarketer’s latest forecast predicts $278.59 billion in US digital ad spending next year, down from the $284.10 billion expected in their previous forecast—a setback of $5.51 billion. This could mean ad spending won’t bottom out.
Budget cuts will affect some channels more than others.
Social networks will be hit the hardest as major platforms struggle to adapt to Apple’s privacy changes. Meanwhile, advertisers are still amping up spend on connected TV (CTV).
Advertisers that can afford to keep spending, will.
These advertisers could gain market share when other brands pull back or go dark. But the longer the recession, the harder it becomes to maintain this strategy.
Forecast
Forecast
Programmatic channels will win as advertisers prioritize flexibility.
Expect programmatic ad spending to experience strong growth across display, digital out-of-home, and podcasting next year.
Macroeconomic conditions will supercharge measurement innovation.
Platforms will address shortcomings in their measurement solutions. And advertisers that move on from expectations they had prior to Apple’s AppTrackingTransparency, and that do more with less data, will succeed.
II. Privacy Enforcement
The ad industry is behind on privacy.
Advertisers are still talking about complying with the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), years after the laws went into effect. In the US, a handful of state privacy laws will come into play in 2023, including the California Privacy Rights Act (CPRA), which places additional restrictions on data sharing, an increasingly common method used by advertisers to address signal loss.
And enforcement is getting serious.
According to data from global law firm CMS, businesses operating in the EU have been issued 412 fines totaling €822.9 million ($829.9 million) under the GDPR so far this year.
In the US, the Federal Trade Commission has signaled that it plans to hold the digital ad industry accountable for its consumer data practices.
It’s not just Big Tech getting hit with fines and lawsuits. In August 2022, Sephora agreed to pay $1.2 million for allegedly failing to comply with the CCPA.
But only about half of US digital media professionals polled this past May were familiar with privacy regulations, per data from Integral Ad Science and YouGov.
Forecast
2023 will come and go without a federal privacy law in the US.
Instead, the ad industry will deal with legislation state by state, on top of various international regulations.
The era of “accept all cookies” buttons will end.
Any business collecting first-party data will need to enhance its consent framework to avoid legal action in certain jurisdictions, like California.
III. Content Moderation
Platforms might lose essential legal protection.
During its current term, which will wrap up by October 2023, the US Supreme Court will hear its first-ever cases involving Section 230 of the Communications Decency Act of 1996. The law protects online platforms from being held liable for what their users post while still allowing the platforms to moderate objectionable content. Without Section 230, many Big Tech business models would be untenable.
Any change to Section 230 would be a huge deal.
If platforms become liable for user-generated content, they would likely have to strengthen content moderation or risk being sued for defamation, incitement of violence, or illegal distribution of materials such as pornography.
In a September 2022 survey (fielded prior to Elon Musk’s takeover of Twitter), less than half of US social media users felt safe participating or posting on major social platforms. More content moderation could provide a sense of security to users.
But some consumers might abandon social media altogether if they feel too much content is taken down.
This goes beyond brand safety.
If platforms don’t remove or demonetize harmful content, they’ll have to answer to concerned advertisers and face lengthy and expensive litigation from private citizens and governing bodies.
Forecast
The Supreme Court won’t declare Section 230 unconstitutional.
But it could alter the way the law is interpreted, spelling trouble for players like TikTok and Google that use algorithms to surface content to users. And some platforms, like Musk’s reimagined Twitter, may not survive.
IV. Retail Media Platforms
Other retailers are coming for Amazon’s ad business.
They’ve all awoken to the revenue opportunity. Although Amazon commands more than three-quarters of US retail media ad spending, that will slowly change as other retailers diversify—and fortify—their offerings.
Expect new partnerships and ad products in 2023.
- Off-site inventory will proliferate as retailers continue to ink deals with publishers and supply-side platforms (SSPs) that want in on the action.
- Amazon competitors with larger brick-and-mortar footprints have a key advantage with in-store media, especially as consumers return to shopping in-person.
- More retailers will provide custom audience segmentation, a solution that has exploded in popularity over the past year, according to Merkle’s August 2022 survey of US retailers and brands.
Forecast
- Nonendemic advertisers will dabble in retail media. As opportunities expand, brands outside of consumer packaged goods will start investing, even without the promise of closed-loop attribution. The retail media networks that set up turnkey activations through major demand-side platforms (DSPs) will gain the most ground among these advertisers.
