‘Conservative, not dystopian’: IAB Europe economist Daniel Knapp’s ad spending outlook for 2023

By Seb Joseph

Looking ahead, the IAB Europe’s chief economist Daniel Knapp is cautiously optimistic about the ad industry’s prospects next year despite headwinds from a hampered economy outlook. There are, however, caveats. Ongoing inflation, higher interest rates and lower stock prices to name a few. So while this year has been a rollercoaster, Knapp doesn’t expect the next one to be any less bumpy.

Digiday caught up with Knapp to dig deeper into his outlook for ad spending 2023, the factors that have shaped it, and how it all could net out.

This conversation has been edited for length and clarity.

Ad spending forecast: cloudy with a chance of recession

Knapp’s outlook on 2023 is as pragmatic as it gets. Indeed, it’s somewhere between the more downbeat forecasts doing the rounds from the likes of Arete and the more upbeat ones from the agency holding groups. That’s the only way to describe a forecast that expects digital ad spending in Europe to grow by 2.4% next year. In short, things are going to get worse before they get better for the industry. “I would love to be proven wrong,” said Knapp.

“But as it stands I can’t see any factors that would allow us to say something else,” he continued. “There will always be pockets of growth, whether that’s spending from luxury rises or as a result of net new money moving into areas like retail media, but the impact of all of these won’t be equally felt.”

In other words, all this slowdown is really going to do — at least in the short to medium term — is stretch the gap between the haves and the haves-nots. That’s why Knapp is conservative but not dystopian in his outlook for ad spending next year. “If you tally up the factors there are more negatives than positives in the short term.”

So it’s going to be cold winter for online advertising in Europe?

That’s about the gist of it. There are just way too many structural issues to think otherwise. From a slowdown in advertising from SMEs who have matured to the e-commerce boom of recent years crashing into reality, a tech correction from growth to profitability to the crypto market crash, a lot of ad dollars are being redirected, paused or cut entirely, said Knapp. And that’s before the bigger, macroeconomic issues are factored into things. The energy crisis has knocked Europe’s ability to compete in manufacturing and ratched up concerns around deindustrialization, Knapp added. Hampered with overwhelming fiscal and employment pressures, the continent is wrestling with unprecedented inflation and economic recession, he continued. Look to the changing fortunes of the platforms for proof, said Knapp.

“If you look at the growth of Meta’s revenues in the last quarter, a higher proportion of its revenue came from APAC than Europe for the first time ever,” said the economist. “Future growth for this industry is going to come from countries like India, Indonesia and Brazil where there are large populations, with rising middle class …read more

Source:: Digiday