Borrell: Local Advertising To Remain Virtually Flat In 2023

A combination of economic pressures and a dramatic change in the composition of businesses created since the pandemic will inflict a double-whammy on local advertising next year, according to new forecasts to be released next week by Borrel Associates.

Borrell is projecting that local advertising will hit $120.7 billion this year and reach $121.5 billion in 2023, representing 0.6% growth. Growth within individual markets next year is forecast to vary significantly, with some showing double the average growth and many declining, Borrell said. Digital forms of ad spending are forecast to grow 5.2% next year, while traditional forms of print, broadcast, outdoor and cable are collectively forecast to drop 6.5%. Broadcast TV will suffer the largest drop, declining by double digits, according to Borrell.

“The source of local advertising is local business, and we’re seeing a dramatically different profile cause by businesses that collapsed or shrank, and by a record influx of new businesses that replaced them,” said Corey Elliott, executive vice president for local market intelligence. “Anybody trying to forecast 2023 based solely on past trends is going to have a tough time.”

Elliott added that the new forecast is fueled not only by the collapse of millions of businesses due to the pandemic and by this year’s economic challenges, but also to the creation of twice as many new, smaller businesses that are quite different than the ones they replaced. In preparing its forecasts, Borrell found the number of U.S. businesses with fewer than 10 employees nearly doubled, while the number of businesses with 25 or more employees declined since March 2020.

Moreover, Borrell found that 6.2 million “high-propensity businesses” — or those designated to be more likely to succeed and grow — have been formed since 2019. Most of the growth has been in businesses with fewer than 10 employees, while the number of businesses with 25 or more employees has declined since the pandemic.

“Because bigger businesses spend more on advertising and smaller ones spend less, this poses challenges to media companies, Elliott said. “It also creates a situation where many of these new entrants are invisible because, as they begin operations, they tend to not spend much money on advertising, or spend most of it on things like search advertising or other forms of digital advertising.”

Borrell will unveil its forecasts and describe the change in business composition during a 45- minute webinar at 11 a.m. ET on Thursday, Nov. 17.  The webinar is free. Register here, or visit http://www.borrellassociates.com for more information.