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Budgets fall, but optimism rises: The Q4 2020 IPA Bellwether report

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Although concerns around the global pandemic continue to impact marketing budgets, the overall squeeze on ad spend is slowing. Not only is the decline less severe than reported in the Q3 findings, but more businesses are expressing positive outlooks regarding their bottom lines.

As a result, the initial forecasts for 2021 – which predict a 6.9% increase in spend this year – suggest a gradual recovery is in store for the marketing sector. Overall, 12% of companies intend to raise their budgets, with their priorities focused on main media advertising and direct marketing.

WNIP caught up with nine industry experts to understand different perspectives on the state of the market, as well as emerging trends that will influence budgets moving forward. 

Tackling increased competition in the digital landscape

With UK consumer spend declining, competition to capture audience interest will be high. According to Zack Sullivan, Chief Revenue Officer at Future Plc, digital frontrunners must prioritise elevating consumer engagement: “With the UK in lockdown, it comes as no shock that marketing budgets are still on the decline; however, preliminary ad spend forecasts for 2021 and 2022 show there may be a light at the end of the tunnel.

“So, with budgets set to bounce back, marketers can begin to develop forward-looking strategies. However, it is vital they realise that consumer engagement has changed for good with people finding new ways to do research and make buying decisions on their path to purchase. The battle for consumer spend will intensify, so marketers must look to diversify their strategies if they are to build and maintain valuable connections with their audience – and stay ahead of their competitors. With a combination of high-intent audiences, quality content and powerful customer loyalty, (high quality) media brands provide the means to build lasting relationships with consumers. Those that have won audiences should be in every marketer’s arsenal moving forward.”

In light of this, transforming digital ad formats to answer consumer needs is an essential competitive edge says Rayhan Perera, CEO and Founder of OneDash, who commented: “For brands, 2021 will be an opportunity to experiment with interactive capabilities for video advertising; looking beyond standard ad creatives to formats that make it easier for consumers to engage and buy. Interactivity distinguishes brands in a crowded market, and we can expect to see it used more widely in 2021, particularly in regards to shoppable video, which will become increasingly popular as advertisers seek to meet consumer demand for a more seamless transaction journey – particularly on social media platforms.”

Making the most of current trends

As the industry continues to adapt in the wake of COVID-19, the strongest players are the ones keeping their finger on the pulse of media consumption habits, while also preparing for future developments. Phil Acton, Country Manager, UK & BeNeFrance at Adform commented: “There will be opportunities to capitalise on media consumption trends that emerged during lockdown periods. The most successful marketers will therefore be those who double down on cross-device strategies, focusing particularly on channels that have experienced the most growth; including CTV, audio and video.

“In the longer term, we can also expect other familiar themes to remain a priority. Transparency will retain its top billing as more brands and agencies turn their attention towards supply path optimisation (SPO) and making maximum use of reduced ad budgets.”

Keeping a finger on the pulse of rapidly evolving media consumption habits is a theme picked up by Justin Taylor, Managing Director UK, Teads, who adds, “We are already seeing the +55’s consuming more travel content than any other demographic and in a recent survey we did almost 45% of adults are thinking about summer holiday plans. If this optimism transverses across other big-ticket purchases we have held back on then ‘when’ it happens this year it will happen big. This is why we are seeing the surge in confidence.”

Video emerges stronger as audiences migrate

Nick Morley, EMEA Managing Director at Integral Ad Science comments: “It’s important to acknowledge that there are still opportunities for marketers to capitalise on media consumption and e-commerce trends that emerged over global lockdown periods. As roughly two-thirds (65%) of UK consumers have a more favourable opinion of brands that serve them contextually relevant ads, marketers will need to review audience targeting strategies in the new cookieless world. Employing contextual technology will be the differentiating factor for marketers in 2021.

“Marketers should also be aware of audience migration across platforms. The newly launched Open Measurement for Web Video SDK from the IAB Tech Lab will be a useful tool for marketers looking to understand the performance of their video advertising in all web placements. This update will help marketers to understand performance across platforms, as it provides access to a single standard across web and mobile apps that is trusted, transparent, and secure.”

Video is also a theme taken up by Ross Nicol, VP EMEA at Zefr: “Video has remained resilient throughout 2020; withstanding the twists and turns of a global pandemic it is on track to continue at the forefront of media campaigns. It’s no surprise that according to the IPA Bellwether Report, video was one of the least impacted formats in Q4 2020, recording just -3.5% reduction in ad spend.

“However, Q4 did not come without its hurdles. The industry saw first-hand how blanket legacy contextual targeting techniques came up short and had costly repercussions on ad revenues. As a result, we are seeing a collective demand from users for increased relevance of ads from advertisers and brands respectively, and achieving this goes far beyond keyword associations. This requires working with contextual data partners to remove waste inventory and improve ad alignment with suitable video content that adheres to each brands’ standards.”

Getting smarter with spending

Alongside reassessing ad targeting methods, Nickolas Rekeda, CMO at MGID, believes brands will also look more closely at their campaign performance and partnerships: “When it comes to ad budgets, brands will be more focused on results than ever before. Although many brands tightened their budgets due to the uncertainty of 2020, this led to the realisation that large volumes of traffic and digital ‘noise’ didn’t guarantee a boost to their bottom lines.

“In reality, issues with ad fraud and bot activity are skewing the alleged value of online traffic; research has revealed fake users and bots remain the most prevalent form of fraud in EMEA (47%), the US (68.7%), and China (65.6%). Going forward, brands will be extra vigilant with how they spend their budgets and make smarter choices in advertising partners, to ensure digital campaigns are brand-safe, fraud-free, and delivering maximum impact to their ad revenues.”

Innovation is key amidst a challenging backdrop

Zara Erismann, MD Publisher Europe, LiveRamp, stresses the importance of innovation moving forwards: “To truly thrive in the current climate, publishers and brands still need to constantly innovate to strengthen their relationships with consumers. It’s not just the pandemic that’s impacting the industry either; we’re operating against a backdrop of increasing privacy regulation and restrictions across the board: the deadline for the deprecation of third-party cookies continues to loom, as does Apple’s restrictions to IDFA and Google’s removal of DCM logs.”   

“There’s a huge opportunity here, however, to build a new and better ecosystem that places trust with consumers at the core. For publishers and advertisers, the key is adopting authenticated addressable solutions, allowing them to personalise and enhance the end-to-end consumer experience, whilst ensuring the individual’s privacy is front and centre. Indeed, this consumer-first approach benefits not just the individual, as there are also tangible benefits to publishers and brands, such as improved targeting and measurement.”

Chloe Grutchfield, Senior Vice President of Product at Sourcepoint adds: “As privacy regulations and frameworks as well as big tech restrictions continue to evolve during this time with the introduction of Apple’s IDFA opt-in and Google’s Privacy Sandbox pitched as a replacement to the third-party cookie, all players in the ecosystem must continue to invest in media and technologies that embrace this new era of consumer privacy and build compliant and future-proof solutions.”