Yesterday’s AA/WARC release revealed that despite an overall growth last year, UK adspend is not immune to economic pressures, with marketers urged to get creative in their investment and reinforce their brand’s distinction.
With WARC conceding a surprising dip in adspend in the later half of the year, which has already dampened appetite for investment in early 2023, we can see a number of not so celebratory “firsts'' in the results – namely the first dip in social spend recorded in the UK and the first dip in search since the pandemic hit.
But recovery, while not quite around the corner, is at least in the wings, and despite downgrades to forecast growth, most channels will see an uplift in spend in 2023.
PMW spoke to our panel of industry experts to get their take on the peaks and troughs of growth in adspend last year, and how marketers can bolster themselves and their brands for the challenging times ahead.
“BVOD is a flourishing area of opportunities, especially for retail media”
Kevin O’Farrell, Associate Vice President, Analytic Partners: “BVOD is a flourishing area of opportunities, especially for retail media, as clearly identified by ITV, which has attracted more than 12 FMCG advertisers to their pilot scheme, which builds on Channel 4’s successful retail media trial. As Europe's retail media market currently sits at a valuation of €8bn, it is a worthy area for brands to focus attention.
“There is a lot of hope for the rest of 2023 and brands should prepare to maximise their marketing budgets. We've found excellent opportunities to take market share, and brands that maintain or increase spend see higher ROI and sustained growth once out the other side of economic turbulence. However, as we have seen over the last few years, change can come about quickly so bearing this in mind, scenario planning is an excellent way to manage any sudden disruptions to the market.”
Oscar Wall, General Manager, EMEA, Recurly: “The increase in ad spend on BVOD comes as no surprise, given the significant growth and success in ad-tiered subscription models with many cost conscious consumers. As the cost of living crisis persists and minimal growth is forecast for the rest of the year, marketers need to shift their focus to retention and increase the value offered to their customers.
“Discounts may attract high-intent consumers, but recurring revenue businesses need to invest in exclusive content, explore pricing strategies and deepen brand loyalty. Incentives and bundling can help justify the price and develop long-term customer relationships. Subscription businesses should use these retention strategies so that brands see value in their advertising investments.”
“The skills shortage is a material barrier to growth”
Jem Lloyd-Williams, CEO, Mindshare UK: “There’s light at the end of the tunnel. In the short to medium term, we need to continue to work closely with clients to maximise returns from a recovering economy, and as we start to get a grip on inflation.
“The report shows that a skills shortage is a material barrier to growth in adspend that needs to be addressed. Media agencies and advertisers have limited control over the wider economy but we can ensure we have the right training, tools, and internal structure, as well as attracting and retaining the right talent. We need to remain focused on building a talent pipeline and arming our people with the skills required to support growth for our clients both now, and in the future.”
Emil Bielski, Managing Director, Croud: “As we see small signs that digital marketing is thriving and providing real value to clients, particularly in a period where budgets are being monitored more closely than ever, agencies should be supporting businesses to make smarter marketing investment decisions and prove value via incrementality.
“As trading conditions look set to improve in the second half of 2023 and economic activity and advertising investment are both pretty flat during the year overall, we should interrogate the opportunities that these statistics present us with – for example, how can we retain talent during industry-wide talent shortages? And how can we continue to upskill the employees we retain in vital digital skills? These, for me, are the most crucial things to consider if the advertising industry is going to start bouncing back confidently over the coming years.”
“Tech advancements in DOOH means infinite possibilities”
Barry Cupples, Group CEO, Talon: “What makes OOH so advantageous for advertisers is that it is a truly omnichannel medium – it can work alongside other channels, such as social media, in a seamless and targeted way as part of integrated campaigns. It is also constantly evolving – technological advancements and data insights in DOOH mean that there are infinite possibilities to reach certain consumers and tailor campaigns accordingly with the ultimate precision, and ensure optimal effectiveness every time.”
Josh Partridge, Head of EMEA, Yahoo: “As footfall increases across retail locations and outdoor events due to warmer weather, I'm expecting marketers will want to increase DOOH spend across their multichannel campaigns. The opportunities programmatic advertising offers in dialling up the mix in real-time across channels that are working together well, and extending campaigns across digital screens in and out of the home will play a key role in driving consumer preference and delivering better marketing results.”
“Linking OOH growth to a pandemic bounceback only tells part of the story”
Nicole Lonsdale, Chief Client Officer, Kinetic UK: “Attributing the strong growth in OOH to bouncing back from the pandemic only tells one part of the story. Sustained investment in new technology and data meant OOH was well placed to weather national lockdowns and then adapt at pace to reach the huge audiences it commands as work and travel behaviour resumed in the immediate aftermath.
“More recently, technology has been a springboard for brands to really explore the creative possibilities of OOH and drive genuine growth. Over the last twelve months we’ve seen higher investment in programmatic DOOH campaigns, dynamic creative activations becoming more mainstream, and the launch of 3D OOH at scale. OOH is thriving and it’s no surprise to see the sector forecast to out-perform the wider industry in 2023. Our predictions are that this growth will be larger than originally forecast.”
“Almost all channels show a dichotomy between ‘digital’ and ‘total’ investment, but there are two that diverge from that trend”
Elliott Millard, Chief Strategy and Planning Officer, Wavemaker UK: "There’s a really interesting trend in the spend data if you look closer. Almost all channels show a dichotomy between ‘digital’ and ‘total’ investment, but there are two that diverge from that trend. The first is OOH, where spend at a headline level has grown faster than in digital, and the second is cinema which has grown at a monster rate.
“Obviously, 2021 was a year where lockdowns constrained our ability to spend time in cinemas and outdoors. But this isn’t the only thing influencing this movement. We are deep in a cost of living crisis and have been in political turmoil. At the same time, advertising is less trusted than it has ever been.
“At moments like these, people seek familiarity, unification, and togetherness. That’s why cinema and OOH are so powerful right now – they are public and they’re a shared experience which means that at least the best advertising is a part of that. The bravest brands will find ways to turn that to their advantage by being more public, more emotional and more unifying. By doing that, they’ll be more trusted by the public during a crisis."
“Leaders want to know tools to reach customers are as efficient as possible”
Dan Pike, Chief Product Officer, Covatic: “Market activity is responding to external pressures and economic uncertainty, with many budgets taking a hit. Forecasts for 2024 suggest a light at the end of the tunnel, but until we get there, brands trying to weather the storm need to be able to trust in their technologies, platforms, and partners.
“Every business leader will want to know the advertising strategies and tools they are using to reach their customers are as effective and efficient as possible, while at the same time not compromising on wider demands around personalisation, transparency, and privacy.”
Bhavin Balvantrai, Chief Market Analyst, Omnicom Media Group UK: “UK advertising continues to show its resilience in the face of macro headwinds and directionally we are heading towards growth. Media is increasing in complexity, and agency expertise in navigating that becomes more crucial for brands when budgets need to work harder.
“The pressure on advertising budgets means a renewed focus on measurement and accountability to ensure campaigns are delivering the best outcomes. Those companies that are able to navigate the current complex data environment, matching, integrating and executing against: customer, retail, third party, on and offline data sources, are those best placed for future success.”
“Take advantage of the generative AI revolution in search”
Gustav Westman, CEO, BrightBid: “Even during economic downturns, brands recognise that search advertising offers measurable results and efficient use of marketing budgets. With more advertisers competing for the same target audience, however, this creates an inflationary spiral and increases cost per click (CPC) rates.
“To stay ahead of the curve, marketing teams need to take advantage of the current generative AI revolution in search, and its benefits. The impact of multimodal search experiences, coupled with the capability of AI technology to produce highly targeted and precise search results, will provide a cost-effective, swift, and low-risk marketing approach to combat rising CPC rates, keeping businesses ahead of the competition.”
“Investing in sports events can be a solution to overcoming fragmented audiences”
Alex Charkham, Chief Strategy Officer, Fuse: “There are mixed fortunes depending on the media but we’ve seen sport and entertainment thrive. It’s hardly surprising that we’re continuing to see year-on-year growth and improvement in advertising post COVID as brands are following the fans and consumers looking to get back to the level of pre-COVID in-person events.
“Investing in major events, such as sport, can be seen as a solution to overcoming fragmented media audiences, as brands can target huge audiences in one go. Sporting events generate high reach and significant media exposure for brands enabling them to signal presence and association with a mass consumer passion point. Events such as Wimbledon, the Women’s World Cup and the Rugby World Cup will play a big part in consumer spending behaviours throughout 2023, and brands will want to maximise those opportunities.”
“Companies that ensure their brand investment cuts across all aspects of experience will come out on top”
David Balko, Chief Client Officer, Tribal Worldwide London: “The looming recession presents challenges, but brands should ensure that they are providing powerful, joined-up brand experiences that extend beyond communications and into long-lasting brand-to-consumer relationships. The unstable economic landscape proves to brands how essential it is to have a strategy and plan in place. There are still many opportunities for brands to succeed during difficult times and companies that ensure their brand investment cuts across all aspects of brand experience will come out on top.”
Maor Sadra, Founder and CEO, INCRMNTAL: “Brands are returning to their advertising roots, with significant investments in cinema, OOH and radio. In previous years, these channels were too often dismissed, due to the difficulty of measuring any ads without a click. Advancements in offline and multichannel measurement have secured their place firmly back at the advertising table, and brands appear to be revelling in the chance to capture audiences at the times they are most engaged, and in fresh, exciting ways that offer a new dimension from traditional screens where generic campaigns often lead to ad-blindness.
“We’re also not surprised to see adspend forecasts downgraded, not only due to the cost of living crisis, but due to the advancements in incrementality measurement that have allowed brands to cut budgets in areas where spend isn’t driving results, without impacting marketing KPIs. The ethos we expect to see throughout the rest of 2023 is to spend smarter, not harder, and be more creative with budgets to captivate audiences on a different level.”
“The prediction that the UK will be the slowest grower in the top 10 ad markets is of course worrying”
Kate Rowlinson, CEO, EssenceMediacom: “These results reflect what we all know – that 2022 was a challenging year for the UK, but it’s encouraging to see that the signs point to renewed growth in 2024. This cautious optimism was evident in our own forecasts.
“The prediction that the UK will be the slowest grower in the top 10 ad markets is of course worrying, as advertising is one of our most significant growth drivers for the economy. As consumers struggle with the cost of living crisis, it's up to us as agencies to empower our clients to help their customers through this difficult time, finding moments of joy and inspiration as well as delivering value across the board through products and services.”