The good news – advertising investment is still set for growth. The more cautionary tale is that the outlook is downgraded from three months ago, and we still face uncertainty on costs and consumer confidence.
However, the latest Advertising Association/WARC Expenditure Report highlights boosts to online advertising, video on-demand and recovery in out-of-home and cinema, while also considering this Christmas to reach the festive season’s highest level of investment.
PMW reached out to the industry to get the leading commentators’ thoughts on what lies ahead – and what marketers need to do to make the most of opportunities ahead.
“Oversaturated traditional digital marketing avenues are likely to hit fever pitch”
Sophie Wooller Dent, Director of Digital Transformation, Croud: “It’s more critical than ever for marketers to prove the value of campaigns to their clients because budgets are coming under more scrutiny. Access to the best measurement solutions is key in demonstrating to brands how their investments impact the wider brand mission. With Christmas adspend set to hit record highs, and brands hoping to recuperate revenue from a somewhat muted year of consumer confidence, oversaturated traditional digital marketing avenues are likely to hit fever pitch. This will only enhance other issues like incredibly inflated CPCs.
“Marketers should be embracing the emerging platforms – such as retail media – in order to avoid these oversaturated markets. Rather, with higher costs already significantly impacting budgets, it’s an opportune time for marketers to explore alternative and innovative ways of reaching audiences, and gain the benefit of first mover advantage, which won’t be around for long.”
Liam Patterson, CEO, Bidnamic: "The latest Alphabet results show a contraction in advertising across its platforms. The ongoing cost of living crisis and inevitable recession is making consumers tighten their belts, while online advertisers, particularly e-commerce companies, are readjusting from a period of high growth at any cost to a more competitive landscape with higher acquisition costs.
“From our perspective, many companies fail to adjust to this new reality. It’s vital for marketers to build sound profit metrics into campaigns. The successful online businesses are getting more savvy with their ad spend and taking time to understand and implement the broad range of tech innovations available to them, such as automation and AI that enable greater optimisation.
“It is important that brands don't succumb to the temptation to cut back on advertising as a whole because this will result in a loss of brand recognition in the long term, which is hard to claw back. The smart e-commerce brands are focusing on growing D2C as part of the omnichannel mix on platforms like Google Shopping as this allows for greater control and personalisation than other channels – like marketplaces in particular – and also delivers back highly valued first-party data."
Lee Baring, Managing Partner, Implementational Planning, The Specialist Works: “Despite positive numbers within Q2 2022 for publishing, OOH and cinema, it should be noted that those increases still put each medium down versus pre-COVID numbers, another indicator that the market has not quite repaired itself at the expected levels. Our estimates are for a slower Q3 than originally predicted in the July forecast as well.
“However, WARC's Q4 forecast gives a more optimistic outlook. As brands become more cautious, spend is likely to move from the top of the funnel to the bottom funnel, where a more ‘accountable’ performance is thought to be seen. This in the short term may provide relief, but for those with less brand equity than their competitors, the long-term consequences are negative and we could see certain sectors redefined in terms of superiority.
“Overall, we're likely to see a lot of movement in the numbers between now and the end of 2022, which will bleed into 2023. Brands will need agile partners, flexible trading platforms, asset diversity and planning neutrality to navigate the upcoming stormy waters.”
Rik Moore, Managing Partner Strategy, The Kite Factory: “The downgrading of growth mirrors what we’ve all come to expect from the recent performance of the UK economy and the terrible cost impact that’s having on the public, all set amidst the context of bleak global headlines.
“That said, the Q2 2022 figures give hope: they show sectors bouncing back from the COVID-19 pandemic and point to the fact that there are brighter times after the bleak.
“Therefore, we must help our clients navigate through the new economic dark times towards the bounce back. Beyond a muted Q4 2022, where the report’s projections suggest many advertisers are refusing to blink as they chase revenue this festive season, how can we help clients navigate 2023? What are the resurgent channels to take advantage of? Where might there be innovative ways to use channels facing decline to maximise cut through and distinctiveness? Thinking like this will enable clients to reach their most appropriate audiences and weather the storm.”
Lee Cutter, VP Sales UK and Emerging Markets, Hivestack: ‘’Continuing recovery for UK ad budgets, solidified by the strong level of investment predicted this holiday season, indicates that brands are aware that they need to continue or even increase their spend to remain competitive. Among these trends is the growth in out of home (OOH) reflecting audiences' increased return to public spaces, with OOH being a highly trusted channel to achieve contextual reach.
“In contrast to common misconceptions that OOH is a standalone media channel, marketers can leverage the benefits of programmatic digital out of home (DOOH) as part of their omnichannel mix. Offering data-driven audience targeting and sophisticated measurement solutions, the channel ensures that spend yields the best ROI, as ad budgets remain closely monitored.’’
“Marketers will have to fight for every penny of spend”
Marianne Yallop, Global Head of Client Services, Redmill Solutions: “Marketers need to tread a very fine line as the economic situation worsens. From one side, brands will need to continue to reach consumers in a sensitive yet impactful way. On the other, budgets are going to come under even closer watch, and marketers will have to fight for every penny of spend.
“Marketers shouldn’t wait for a ‘post-mortem’ on their media spend but have fingertip access to media data to be able to constantly examine customer intent and stay agile in response to unforeseen challenges. This way, they can reduce waste to future-proof budgets and know exactly where their spend is in an ever-changeable industry.”
Natalie Dawson, Strategic Agency Sales Director, Ozone: “During what has been a quite tumultuous time for the country as a whole, it’s reassuring to see a relatively strong – albeit slightly downgraded – forecast for adspend for the rest of the year.
“As we motor through the final quarter of 2022, at Ozone we expect the first-ever winter World Cup and the build up to the festive season to drive greater investment into contextually-rich, highly-engaged media channels. On top of this, this quarter will continue to see many brands turn to premium environments to help them navigate consumer messaging around the cost of living crisis – in particular, through alignment with the editorial expertise of our publishing teams who deftly manage the daily balance between helping readers understand what’s going on in the world, while also entertaining them.
“Looking forward to 2023, and with digital advertising share looking set to breach 75% of all spend, we hope to see even greater rigour and practices put in place to ensure campaigns run on websites that put real consumer engagement – and therefore better, more sustainable results – at their core.”
Liz Duff, Head of Commercial and Operations, Total Media: "Ad spend is up for several reasons – one is that brands who might not commit to Q4 spend usually are taking action thanks to the upcoming World Cup. Another is that economic uncertainty has yet to hit marketing budgets – so marketers are keen to spend before any cuts might hit next year.
“Another reason has been the interesting and rapid recovery of OOH – cinema and outside advertising have benefitted from high footfall as lockdown habits have all but disappeared.”
Sue Azari, E-commerce Industry Lead, EMEA and LATAM, AppsFlyer: "As brands are looking to raise visibility through digital channels, marketers will also be focusing on owned media as a cost-effective means to maintain their connections with users and complement their paid online advertising strategies. We’ve seen this within the e-commerce landscape in particular, with owned media conversions soaring 360% year-over-year in July 2022.
“Brands and businesses across sectors can make the most of their budgets as well by investing in channels which deliver a positive ROI, meaning that the ability to measure paid activity across the full funnel becomes even more important. Maximising impact and minimising wasted spend is now front of mind for marketers.”
Clare Dove, UK Group Commercial Director, Future: “It’s essential that marketers understand where audiences can be found and foster meaningful connections with them to drive ROI. Premium publishers can facilitate this relationship between advertisers and readers that match brands’ target audiences by providing accurate data on their interests and passions while producing content that speaks to their needs.
“We have learned that Future’s audience is significantly more likely than the average UK consumer to opt in for “treating myself and/or my loved one” to various items and experiences in the next few months, for example. Successfully tapping into ready-to-spend groups such as these can help brands shine and drive considerable uplift in Q4.”
“Desire for VOD ad inventory not surprising”
Raphaelle Tripet, Managing Director, Demand Sales EMEA, TripleLift: “Growing investments in online formats – in particular display and video on-demand (VOD) – signal brands' awareness of how effective these channels are when it comes to targeting consumers during key shopping times and maintain share of voice in a very competitive time of the year.
“However, even with increased ad spend in their pockets during the most lucrative quarter in the year, brands can’t afford the risk of taking a spray and pray approach to their campaigns. It’s therefore crucial that advertisers look for efficiencies in their media buys but also in their campaign set ups and launch, which will enable them to secure better ad placements and deliver more impactful creatives.”
Oscar Wall, General Manager EMEA, Recurly: “Due to rising inflation and the cost of living crisis, global VOD platforms are starting to offer ad-tiered services to make content more accessible for households looking to cut budgets. This hybrid offer has created a unique opportunity for advertisers to reach new audiences and for global VOD platforms to personalise subscription offerings.
“Considering the global VOD platforms' large viewership, their ability to target ads to specific cohorts, and the fact that these platforms have been ad-free to date, it's not surprising that this ad inventory will be highly sought after.”
Zvika Netter, CEO and Co-Founder, Innovid: “With global economic uncertainty driving the need to ‘do more with less’, marketers will invest in technology to increase the effectiveness of their ad campaigns. Independent, cross-platform measurement, especially, will be used to ensure they are efficiently reaching the right audiences, with the right creatives, in the right places and times – across linear TV, connected TV, and digital video.
“Real-time, data-backed insights into who is watching, when, where, and the actions they drive will also be table stakes, with advertisers leveraging the intel to make continuous media and creative optimisations that improve reach, strengthen outcomes, and directly benefit the bottomline.”
Stefanie Briec, Director, Head of Demand Sales UK and International, AudienceXpress, FreeWheel: “Advanced TV channels, including VOD and broadcaster video on-demand (BVOD), are experiencing notable growth because of their capacity to drive higher ad effectiveness and support advanced audience targeting methods. This offers impact and precision, which are now vital as advertisers aim to make the most of budgets.
“Encouraging further spend in this space will require the video advertising ecosystem to address buyers’ top measurement priorities. With budgets being subject to ongoing reviews, ad buyers will value the ability to further justify investment with trusted and tangible results.”
“Marketers are not just being brave with spending, but smart”
Michael Richards, Managing Director, alan. “While the headline growth figures look fantastic, as ever the devil is in the detail and while ad spend is up, inflation and squeezed margins mean advertisers are facing higher costs, and potentially less bang for their buck.
“But the silver lining is that advertisers are sticking to their guns and continuing to prioritise advertising investment to protect their brands. The market and economy is turbulent, but brands that can remain true to their core and find ways of cutting through the pain and noise will reap the rewards. You can’t afford to be tone deaf at times of crisis, but do put your money where your mouth is when it comes to telling brand truths.
“Take the Daily Star Lettuce – it has had us all chortling away, but what a brilliant piece of brand investment which has captured the globe’s imagination and spawned, what I hope, was some lucrative product placements from Marmite to Greggs. Don’t be afraid to be provocative and stick to your brand truth and you’ll ride out the advertising roller coaster.”
Chris Hogg, Chief Revenue Officer, Lotame: “With the recession’s clouds on the horizon, there was worry media buyers in the UK would seek shelter by pulling back, but this forecast suggests they’ve chosen the braver strategy of powering through the economic storm with record spend.
“Combined with the soaring interest in precise custom audience segments seen on our end, we’re confident that marketers are not just being brave with their spending, they’re being smart too. It’s also reassuring to see healthy ad revenues for publishers, who have been fighting to stop the spend they depend on from being redirected to walled gardens. We’ve experienced increasing interest in cookie-free identity solutions from publishers seeking to enrich their audience data and remain competitive against the big three, and it’s wonderful that this seems to be paying off, as their success is the success of the open web.”
Andy Ashley, Global Marketing Director, SmartFrame Technologies: “It’s reassuring to see continued recovery within the industry, but there is no doubt that the realities of a cost-of-living crisis, growing energy prices, and rising inflation are starting to take effect. Brands are exercising caution when it comes to investing their ad spend, and these financial concerns are weighing on the minds of consumers and businesses alike.
“What we all need most amidst this uncertainty is to create clarity. A customer wants to know what they’re getting and whether it truly meets their needs, while a brand wants to know where their ads are placed and whether their campaigns are effective. Solutions that provide full transparency will help everyone navigate these choppy waters while maintaining vital industry priorities – such as a commitment to privacy and brand safety.”
Michele Szabocsik, VP of Product Marketing at BlueConic: “The positive results among the publishing sector are a sign that the business transformations they’ve undergone over the last several years are starting to pay off, especially for the most forward-thinking publishers. There has been a significant shift towards prioritising investment in first-party data and transforming their relationships with readers and advertising partners alike.
“This shift has made them less reliant on walled gardens and other intermediaries that normally would eat into their margins. Now they’re taking control of their own destiny and experimenting with new audience engagement tactics to not only improve the experiences of their readers and viewers, but also develop new monetization strategies and products that would not have been possible before. Doing so has made them significantly more resilient when macroeconomic factors like the pandemic, inflation, and a recession come into play.”
Faye Daffarn, Managing Director, Tug Agency: “In the current environment it makes sense that marketers are directing more budget into search as they look to compete for a slice of consumer spend. However, with sustainability high on the agenda for both brands and their target audiences, the impact of this increase on the environment should be considered. Google search queries already create over 400,000 tonnes of CO2 submissions each year.
“Steps marketers can take to implement greener digital practices, whilst continuing to leverage the effectiveness of search, include cutting back surplus parameter pages by consolidating them into master pages, or placing advertising with search engines that prioritise sustainability.”
“Reassuring to see resilience in the industry”
Michal Marcinik, CEO and Co-Founder, AdTonos: “It’s great to see that audio is recognised as an important part of the advertiser’s toolkit, as it’s proven to inspire better ad engagement and recall of up to 25% over other formats. It’s also reassuring to see the industry as a whole displaying resilience in the face of socioeconomic uncertainty and political instability. Nevertheless I expect more cautious spending in the near future.
“Companies that want to strengthen their market position during these times would do well to continue trusting in audio, with sonic audio cues outperforming visuals nearly ninefold. People will still be listening to podcasts and streaming music even if there is a market downturn, so there will always be an opportunity to reach their ears.”
Sam Budd, Founder and CEO, Buddy Media Group: "We have seen almost all our global clients, tech particularly, transitioning from a new customer acquisition strategy to a direct active monthly user and bottom-line focus. This has required a substantial shift in approach, restrategising and realignment as an agency to ensure we are able to maintain our service and client base going into 2023.
"With budgets and focuses under scrutiny, brands and agencies must find innovative ways to drive more meaningful connections, create desire and cut-through in extremely competitive landscapes to ensure consumers stay present and engaged, and ultimately, continue to spend during this tumultuous period."
Louise Johnson, CEO, Fuse: “The appeal of sport and entertainment partnerships – sometimes considered a ‘luxury investment’ by many brands – has grown in the last few years due to factors impacting advertising effectiveness, particularly the inflating cost of media and audience fragmentation.
“Specifically, sport’s ability to command mass audiences, particularly on TV, is an attractive proposition for brands seeking a solution to the problem of media fragmentation. The ability to lock-in price over a multi-year period also means that brands can ride the wave of inflation over the mid to long-term.”
Rowenna Prest, Chief Strategy Officer, Joint: “With inflation a key driver of price rises, advertisers need to be more focused than ever in ensuring all elements of their campaigns pay back as strongly as possible. Let’s hope as we head into what's set to be another record-breaking Christmas media market, that we remember the ROI magic of delivering ‘the feels’ to customers.”
Sarah Parkes, Chief Sales and Marketing Officer, Talon Outdoor: "Already, OOH spend has increased by 46.4% in Q2 and advertisers are recognising the huge benefits it has to create impact and drive results. This is going to serve brands particularly well as we head into an extremely busy, festive season, where brands are also competing for cut-through. Through technological advancements in programmatic and digital out-of-home brands have the ability to also maximise results with hugely targeted and flexible approaches."
Zac Pinkham, VP Demand Europe, AdsWizz: “With the UK facing a tight economic winter, we’ll expect to see brands look to maximise their ad spend in tried, tested and trusted mediums, so as to ensure best results. Research from the Eurobarometer survey very recently said that radio is the most trusted medium in Europe, and the positive growth of radio ad spend in this latest AA/WARC report is further proof that radio still proves to be an effective platform for brands to reach users.”
Camille Flores-Kilfoyle, Head of Marketing, EMEA, Reputation: “The busy Christmas period adds to marketing pressures, and from a customer experience point of view, marketers must ensure they understand their customers’ needs and expectations, especially given the current client. Businesses should tighten up best practices and ensure consumer engagement is at the core of their marketing campaigns.
“Moving forward into 2023, it’ll all be about optimisation. Adspend is expected to increase so marketers need the ability to deliver a consistent, connected customer experience and optimise the efficiency of the campaign process.”