After 14 months of consecutive growth, why does the US ad market still feel so bleak?

The US ad market has now grown for 14 consecutive months, according to data from Guideline (previously Standard Media Index). Guideline’s latest update shows 1.9% growth YoY in May, a deceleration after several months of higher growth. Despite consistent growth, advertisers aren’t necessarily feeling optimistic. Budgets are tight, and advertisers are under pressure. So why do things feel bleak despite evidence to the contrary?

“There are too many existential crises happening at once,” said our analyst Evelyn Mitchell-Wolf. “The industry knows winter is coming and is too busy preparing for assaults on multiple fronts to enjoy the summer while it's here.”

Existential crisis: Ad-tracking capabilities dissolve due to privacy concerns

• Having enough first-party data for targeting and activation ranked as the No. 3 concern among US brands and agencies, according to November 2023 Interactive Advertising Bureau (IAB) data.
• “Google postponing third-party cookie deprecation in Chrome seems to have prolonged industry anxiety rather than providing temporary relief,” said Mitchell-Wolf, who also suggested some stakeholders may have checked out of finding third-party cookie alternatives altogether.

Existential crisis: Generative AI takes over ad jobs

• Even if ad spend is healthy, the industry’s job market may set off alarm bells. The US lost 2,200 ad jobs in May, according to data from the Bureau of Labor Statistics as reported by AdAge. That’s the steepest monthly decline since the start of 2021.
• Fears were exacerbated when OpenAI founder Sam Altman declared earlier this year that “95% of what marketers use agencies, strategists, and creative professionals for today will easily, nearly instantly and at almost no cost be handled by the AI.”

Existential crisis: Generative AI and TikTok topple traditional search

• ChatGPT and AI search engines like Perplexity present a challenge for Google, and as a result could transform search advertising.
• At the same time, Gen Z prefers searching on social media sites like TikTok, rather than on search engines, according to 2023 GWI data.
• Google is losing share of total US search ad spend, which will fall below 50% next year, per our March 2024 forecast.
• Google’s diminishing share isn’t happening due to generative AI but from retail media, which will account for 27.2% of total US search ad spend this year.
• Still, Google is facing new threats, and that’s causing anxiety for advertisers who don’t know what the next era of search could look like.

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