Ad Buys Remain Sluggish

The deceleration of U.S. advertising growth through May 2025, described as pacing toward the worst quarter since the last ad recession, reflects a significant slowdown in the ad market, driven by economic uncertainty and structural shifts. 

Here is a detailed breakdown based on available information, particularly from MediaPost and related sources.

Key Points on Ad Growth Deceleration

• Weak Growth in April/May 2025:"Forward bookings" (advanced U.S. ad sales) for April and May 2025 grew by only 1.8% compared to the same period in 2024, according to Guideline’s estimates. This marks a sharp decline from earlier months and signals that the second quarter (Q2) of 2025 is on track to be the weakest growth quarter since the last ad recession ended in April 2023.
• This follows a broader trend of decelerating growth, with February 2025 ad spending rising by just 2.8% year-over-year, one of the lowest rates since the recession’s end.

Comparison to Historical Context:

• The last U.S. ad recession, triggered by the COVID-19 pandemic, ran from February to April 2020, one of the shortest but most severe downturns.
• The current slowdown is notable because it contrasts with double-digit ad growth in December 2024 and January 2025, indicating a rapid shift in market dynamics.
• Guideline’s data suggests Q2 2025 could underperform even May 2024, which, alongside February 2025, had among the lowest growth rates post-recession.

Sector-Specific Impact:

• Local TV:  Forward ad bookings for April/May 2025 are down 24% for local TV, highlighting significant weakness in traditional media.
• Digital and performance-based ads are expected to fare better, continuing to capture market share from legacy media, a trend that accelerates during downturns.

The Trump administration’s on-again, off-again tariff policies, implemented in early 2025, have fueled market instability. Tariffs raise costs, impacting consumer spending and, consequently, ad budgets. Persistent inflation, though down to 2.4% annually in March 2025 (the lowest since September 2024), continues to pressure advertisers.

Recession Fears: Wall Street is increasingly pricing in a 2025 recession, with the Atlanta Federal Reserve’s “GDP Now” forecast showing a Q1 2025 GDP decline of over 1%. A potential $9 trillion U.S. debt refinancing challenge within six months could further strain the economy, forcing a controlled slowdown or recession to lower interest rates.

Consumer Spending: Early 2025 retail sales weakened, with January declines and only modest February recovery, partly due to temporary factors like weather and wildfires. This reduced demand for goods and services, prompting brands to cut ad budgets. Brands are adjusting budgets mid-year due to tariff-related uncertainties and economic volatility, with traditional and social media platforms facing deeper cuts.