Yesterday’s news that ad spend in Q1 2022 outperformed expectations was met with signals of encouragement, but a clear consensus that the industry needs to prepare for a tricky year ahead.
AA/WARC has downgraded forecasts for growth next year – warning of the potential for a contraction in real terms – as consumers and businesses feel more than the pinch of rising costs, soaring inflation and the impact of political uncertainty both in the UK and overseas.
PMW’s round-up of the views of leading industry commentators warns of unpredictability in consumer behaviour, the need to focus on effectiveness and why data is crucial to ensuring optimal spend and reach.
“Disruption has become the new normal”
Jay Stevens, CEO, Redmill Solutions: “Given the inflationary impacts signposted in the report, the pressure is on for brands to procure the level of insight required to pivot ad budgets quickly to the areas that produce the greatest ROI. CMOs must act decisively; they need to have a clear line of sight on their global media data to justify spend and make informed decisions on where cuts can be made.
“Disruption has become the new normal, and brands should be relying on a single source of truth to show investment across all aspects of the marketing funnel. This will allow them to make shifts in spend depending on what’s working, knowing what can be cut and minimising penalties.”
Ronny Golan, CEO and Co-Founder, ViewersLogic: “Recent economic and political events have upended any last glimmer of predictable consumer behaviour for marketers and their media planning. To prevent further drops in sales and unwanted pressure on margins, brands need to pay close attention to the rapidly changing behaviours of the individuals that make up their target audiences.
"The accepted wisdom is that [brands] need to pay a fortune to major industry players to uncover these consumer insights, however, not only is this increasingly unattainable as businesses look to cut costs, but the data is often probabilistic and simply no longer fit for purpose in dynamic environments.
“Marketers should be finding alternative data sources at lower costs that can provide accurate reflections of current consumer behaviour, help them significantly reduce waste and maximise campaign efficiency.”
“Digital campaigns with multiple creative assets will need performance measured and improved”
Anthony Lamy, VP EMEA Client Partnerships, VidMob: “With pressure set to grow on ROI and efficiency, many advertisers will be challenged to prove the value of all investments. Creative is an area where attention is turning; digital campaigns with multiple creative assets will increasingly need to have performance measured and improved, to be fully optimised and performing well.
“Now is the time to use creative as a competitive advantage. Brands that recognise the power of technology to generate real-time, data driven insights will benefit from better creative workflow, speed and effectiveness within their campaigns to come out the strongest.”
Andy Ashley, Global Marketing Director, SmartFrame Technologies: “It’s encouraging to see UK adspend grow, but as investment in online formats increases – particularly for display and social – brands need to pay more attention to how and where they’re advertising.
“Misinformation remains a threat, not only to the authenticity and reputation of a brand, but to the general public. Brands need to be certain their message will not be associated with unsavoury content – something that happens far too easily in a media ecosystem in which digital images are stolen, tampered with, and shared constantly. With the imminent death of third-party cookies, investing in contextual is more important than ever to address these concerns and deliver effective brand safety.”
Ben Putley, CEO and Co-Founder, Alkimi Exchange: “Whilst the report signposts modest growth in budgets, marketers are wise to proceed with caution amid the looming contraction of UK ad investment in 2023. For advertising and publishing players, blockchain technology possesses the capabilities to bring much-needed visibility and trust, creating new models of efficiency and effectiveness to optimise advertising spend and ROI.
“Emerging technologies such as decentralised ad exchanges provide the opportunity for advertisers across the ecosystem to achieve transparency over the supply paths, reducing fees whilst protecting privacy.”
“Brands exist to defend a price premium”
Elliott Millard, Head of Planning, Wavemaker UK: "As inflation starts to bite and the well-documented cost of living crisis pushes consumers toward ever more difficult decisions – switching to private label is the most evident one here, an idea that was almost government policy for a while – there will likely be a boardroom focus on the effectiveness of advertising.
“We shouldn’t shy away from that focus – any credible marketing agency should be talking in terms of effectiveness and real world returns. But we should also acknowledge that brands exist to some extent to defend a price premium and that there is a long term benefit of advertising that translates to sustaining that. In a world where both consumers and brands are under enormous pressure, it is striking that some brands, Pepsi and Unilever, for example, have managed to increase prices without much public outcry. This is about the power of those brands.
“It’s tempting to move to short-termism or the new and shiny and to focus on channels that give an immediate, trackable response. Still, advertising is not always there just to drive incremental sales – it can defend the brand’s price power as well."
Hugh Fletcher, Global Marketing Director and Thought Leadership Lead, Wunderman Thompson Commerce: “The global and economic disruption experienced in the last quarter has been unprecedented. So an uptick in advertising budgets should be celebrated, albeit with a pinch of salt. Challenges remain in how global brands build genuine connections with audiences, to not only encourage spending amidst the rising cost of living but form deeper connections where consumers invest in the brand in the long term. Be it search, display or social ads, creating a consistent, frictionless and unforgettable customer journey can unlock innovation and growth; and it’s the human and empathetic experiences that consumers will resonate with most.
“34% of global shoppers get their inspiration from marketplaces, and 28% seek inspiration from social media. Therefore, brands must think omnichannel when it comes to marketing and ad spend or risk losing customers at the first hurdle. The long term outlook for 2023 is unpredictable. However, brands should focus their investment where ROI is the greatest, and where it’s most relevant to their audiences, to ensure they are visible online, on social channels and in their favourite games and apps. COVID was a solid reminder that when times are tough, consumers relate to and buy from brands that appear to be in the moment with them, and trust between brand and consumer means everything in this day and age.”
John Stoneman, SVP, Global Demand, TripleLift: “It’s not surprising to experience tightening margins during times of economic uncertainty, but that doesn’t mean brands are reining in their marketing efforts. Companies such as Unilever, for example, are continuing to invest ad dollars in their brands amid rising prices.
“If we can take away any lesson from previous periods of decline, such as the pandemic, it is that the ad market is resilient enough to recover much faster than we expect. Key to this is adopting media buying strategies that allow for versatility, scale, and data-driven efficiency.”
“Advertisers must invest in the most accurate data sources to meet business goals”
Charlie Johnson, VP, International, Digital Element: “While the growth we saw in Q1 is encouraging, brands must continue striving to deliver the most efficient strategies that ensure any progress is maintained through the rest of 2022 – especially as we contend with the mounting pressures of a cookieless future and the cost of living crisis.
“As we see connected TV boom, insight-driven cross-platform targeting will be crucial to deliver effective campaigns that reach audiences wherever and however they are engaging. So increasing ad spend alone isn’t enough; advertisers must also invest in the most accurate data sources to make sure these growing budgets meet actual business goals.”
Chris Hogg, Chief Revenue Officer, Lotame: “It is hard to believe we are six months finished with 2022, and when it started, there was no meaningful Omicron surge, no war in Europe, no soaring inflation, and no supply chain issues. By July 2022 standards, it all seems quaint. From our global data marketplace, we saw slow growth in Q1 and some steadiness in Q2, which is a positive sign. However, marketers should not dismiss the impact of a lockdown-driven recession in China which contributes 20% to that global forecast.
"Marketers have significant hurdles ahead with changing privacy regulations and the loss of important identity signals. However, privacy-first cookieless solutions are already available, engaging with customers and prospects. By spending smarter and reducing waste, marketing dollars can go farther despite shrinking budgets thanks to digital's inherent ‘test and learn’ environment”.
Harriet Durnford-Smith, Chief Marketing Officer at Adverity: “With both businesses and consumers being hit hard by inflationary pressures, it’s never been more critical that marketers are able to operate efficiently and demonstrate ROI. Access to accurate data will allow marketers to make quick, informed decisions and forecast the impact of these on the bottom line.
“In addition to increasing financial uncertainty, we are still seeing many industries recovering from the pandemic. Continuing disruptions to the ‘business as normal’ scenario means marketers must be armed with the data they need in order to mitigate risk and optimise spend.”
“Ad space should be cheaper as large tech and consumer brands pull back spend”
Jake Stott, CEO, Hype Partners: "With persistent high inflation, we expect this to negatively impact household spending on many consumer goods.
"If consumer spending is less than current levels we should see lower conversion rates on paid media for some brands. However, CPAs could remain constant with massively reduced demand for ad space. Ad space should be cheaper across all mediums due to the largest tech and consumer brands pulling back spend.
"Additionally, if we have hot summer weather, out-of-home spend should increase in effectiveness with social media effectiveness decreasing as fewer people sit inside and scroll news feeds. This gives companies the opportunity to realign budgets and test new channels like TikTok and Metaverse, as other channels like Facebook and Netflix decrease in popularity.”
Ben Erdos, Chief Services Officer, Total Media Solutions: “What we’re seeing from the publisher-side of the industry reflects the findings of the latest report. The first quarter was much stronger than we were expecting, and it is positive to see that brands bounced back as Covid loosened its grip. But we are out of the frying pan and into the fire because the confluence of war in Ukraine, rising inflation and low consumer confidence could all impact publisher revenue over the coming months – and that’s even if we avoid a recession.
“For publishers to handle the heat, they will need to make a commitment to maintaining a high quality site and improving user experience so audiences continue to value their offering. Related to that, it’s important publishers pursue revenue diversification – whether that’s through advertising or subscriptions, audio or video – so users always have a range of options that cater to their priorities and preferences.”
Dave Randall, Commercial Director, Future: “Brands must devise their strategies to engage consumers who have been affected by mounting economic headwinds. Spending priorities have inevitably changed; our own data shows that more than four in five UK individuals expect to cut back on non-essential retail goods amid the cost of living crisis and 94% are seeking expert help and advice from trusted content ahead of Black Friday and Christmas to find the best value-for-money deals and discount vouchers.
“Working with premium publishers, whose audiences are looking for content to help make informed choices that ensure household budgets go further, will be crucial to keeping brand’s advertising budgets on track.”