Advertising expenditures are highly cyclical, generally tracking GDP but with amplified volatility—rising faster in expansions and falling harder in recessions.
- Advertising has historically had a strong positive correlation with GDP (r ≈ 0.74 from 2000–2019).
- Advertising is an “above-average beta” to the economy—more volatile than GDP. In 2009, for instance, U.S. real GDP fell ~2.5% while U.S. ad spend fell ~12–18% (depending on the estimate)
- During recessions, ad budgets are cut disproportionately. Recovery periods often see ad spending rebounding faster than GDP.
- Advertising as a share of GDP has ranged between 1%–2% in mature markets (U.S. averaged ~1.3–2.0% of GDP over 20 years). In the U.S., advertising was about 2.4% of GDP in 2000, fell to ~1.8% by 2009, and was around 1.4% by 2019 , reflecting both the 2008–09 cutbacks and longer-term efficiency gains. Interestingly, in 2021, U.S. advertising as % of GDP jumped again (by one estimate to ~1.4%, up 22% relative to 2019), indicating the post-COVID surge in ad spend outpaced the GDP recovery.
- Digital advertising has increasingly detached from GDP trends, growing 7× faster than the economy on average since 2010.
- Digital ad spending has a much weaker correlation with GDP in past data, because it has been driven largely by a secular growth trend. Thus, the correlation coefficient between digital ad growth and GDP growth is lower than that of total ads. → It’s worth noting that as digital now comprises ~65% of total ads in 2023, going forward its growth will inevitably converge more with overall economic growth rates
- Social media ad spend, as a subset of digital, has the weakest direct correlation with GDP historically, simply because it has been almost entirely driven by the user growth and engagement of social platforms, and even growing in some recessions
Ad Market Performance in Past Recessions
- 2001 Dot-Com Bust:
- Global GDP grew mildly (+2%), but ad spending fell ~4%, led by U.S. (-9.8%), US economy actually grew a modest +1.0% in 2001.
- Early internet ad spend dropped ~12% as tech firms cut marketing.
- Marked the first global ad spending decline in decades.
- 2008–09 Great Recession:
- 2008: Global GDP slowed to +3%, and ad spend barely grew (+3%).
- 2009: GDP shrank (-0.1%), but global ad spending collapsed (-9.5%).
- U.S. ad spending dropped ~18% in 2009, with traditional media hit hardest. With GDP at -2.5%
- Digital ads proved resilient: +10% growth in 2008, and -3.4% in 2009.
- 2020 COVID-19 Recession:
- Global GDP declined sharply (-3.3%), but ad spending fell less than expected (-5.8%).
- Digital ad spending grew (+12%), cushioning overall declines.
- Social media ad spend rose ~20%, benefiting from higher online engagement.
- Fast recovery in 2021 (+27.9% ad spending vs. +6% GDP growth).
Key Factors Influencing Future Trends:
- Structural Shifts in Media Consumption: Growth in streaming, e-commerce, and social media may decouple ad spend from GDP.
- Performance Marketing & Ad Targeting: Data-driven ad strategies may make ad spend more stable during downturns.
- Permanent vs. Cyclical Budget Changes: Past recessions permanently shifted ad budgets to digital.
- Macroeconomic Dynamics: Inflation, interest rates, and corporate profitability may influence ad spend more than GDP alone.
- Market Concentration & Platform Policies: Regulatory shifts and platform advertising strategies could introduce new constraints.