Advertising Interesting and Timeless
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“Total UK marketing budget growth at its slowest since Q1 2021”: IPA Bellwether Q3 report reaction

UK marketing budget growth has slowed considerably as economic headwinds gather. Events (also the biggest source of revenue growth in WAN-IFRA’s recent World Press Trends preview) were the main driver for budget growth in the last quarter. Other categories were reduced for the first time since the start of 2021. Below is an overview of industry reaction.

Despite the cost-of-living crisis, soaring energy bills, and rising inflation, UK companies were able to once again increase their marketing budgets this quarter, according to the latest IPA Bellwether report. This growth has, however, slowed considerably, as the momentum witnessed during the first half of the year dropping off as the industry works to comprehend the impact of a a gloomy economic outlook.

Events were the main driver for budget growth in the last quarter, with the post-Covid appetite for in-person meetings and engagements pushing spend in the sector up to 22.2% since Q2 2022. Other categories were cautiously reduced for the first time since the start of 2021. However, this gentle nature of the decrease suggests leaders are not keen to pull on the brakes too hard and risk causing more tumult.

Nevertheless, some optimism remains after the government’s announced support for bills, with many business leaders agreeing that focusing on quality and is the way forward.

It all starts and ends with data

In a period of economic downturn and reduced spend, Harriet Durnford-Smith, CMO at Adverity highlights the importance of data to help businesses ensure companies can reach the right customers when circumstances are weighing on customer spend.

Harriet Durnford-Smith, Adverity

“While it is positive to see marketing budgets are still growing, the fact they are growing at the slowest rate since during the pandemic is not surprising. Ultimately this means that marketing budgets are going to have to work harder at achieving business goals. At the same time, the cost of living crisis means that customers are being more selective about where and when they spend their money.

“This means more than ever, businesses need to be getting the right message to the right people in the right place at the right time. You cannot do this based on gut feeling. This starts and ends with data. Businesses need to integrate all of their data from sales, marketing, and inventory to get the insights they need over business and campaign performance to navigate any uncertain period of uncertainty.”

For publishers looking to avoid placing all their eggs in one basket during a period of uncertainty, diversification holds the key. The outcome of this depends, according to Sivan Tafla, CEO at Total Media Solutions, on having the right first-party data to build trust with audiences.

“Gloomy economic horizons will have publishers working harder than ever to diversify their revenue streams and lessen their reliance on tightening ad budgets. If a new channel is to succeed, publishers need to focus on quality and forge close relationships with their audience. First-party data is invaluable in building the trust between audience and publisher, while allowing for more tailored, valuable content. An effective first party data strategy needs to be top priority for every publisher.”

Lauren Tiley, VP of Client Development at Permutive, adds, “It’s encouraging to see marketing budgets are still on an upward trajectory against the challenging economic backdrop. However, as consumers increasingly opt-out of their data being collected and used for hyper-targeting and tracking by third parties, resulting in just 30% of the open web being addressable, brands wanting to reach their audiences must stop working against consumer choice and start investing responsibly.

“This means scaling their data by working directly with publishers’ first-party, non-personally identifiable, consented data. In this way, brands can reach audiences across all environments without identifying individuals and compromising their privacy, while ensuring media investment is working harder during a time of recession.”

Choose your partners wisely

While the economic and financial circumstances are challenging, Andy Ashley, Global Marketing Director, SmartFrame Technologies, highlights the importance of remaining committed to key industry concerns around privacy and brand safety.

“As expected, inflation and the cost-of-living crisis have heavily impacted business decisions and marketing budgets. Despite this, there are developments in the industry that must be upheld: a commitment to privacy, brand safety, and creative that is both relevant and engaging. Brands and agencies need partners that are versatile, can cover a lot of ground, and truly drive value. In the wake of cookie deprecation, this means nailing contextual and being able to provide proof of ROI, as well as focusing on transparency and clarity throughout the whole supply chain.”

With contextual coming out on top in a privacy-first environment, using tools that protect consumers while facilitating targeting will help businesses weather the storm of tightening budgets, states Charlie Johnson, VP International , Digital Element.

“While many businesses might be cutting their spend, now is time to invest in both communications and technology to get ahead of competitors. This puts innovative tools that provide quality data at the top of the list, to help businesses optimise where possible and provide proof of ROI. With contextual targeting a huge contender in a privacy-first advertising space, IP data can be invaluable when it comes to user insights such as geolocation and connection data.”

Despite the uncertainty, there are reasons to be optimistic, especially considering the opportunities – such as Christmas and Black Friday – ahead. Having the right partnerships will help brands tap into these groups, notes Clare Dove, UK Group Commercial Director, Future.

Clare Dove, UK Group Commercial Director, Future plc

While it’s understandable that brands are becoming more cautious, our own data shows there is quiet optimism among consumers, with anticipation ahead of Black Friday and Christmas growing every day. Furthermore, consumers are looking forward to Christmas advertising that is celebrational, and offers practical tips and family-focused messaging. This underlying feeling of positivity means there are still plenty of opportunities for advertisers.

“However, it will be down to marketers to find key high intent audiences to drive ROI. Premium publishers who’s audiences are looking for trusted content to help inform their purchase decisions will supply brands with the data they need to tap consumers’ interests and passions.”

Seven in ten Future readers agree they need a “job well done” treat now and again, compared to just 16% of the general UK population; tapping into these ready-to-spend groups will be a significant area where many brands can shine and drive the most effective campaigns in Q4.

Clare Dove, UK Group Commercial Director, Future

Keep up with change

Change is the only constant businesses really need to get to grips with, according to Michael Nevins, CMO at Equativ, and investing in the right tools to meet this volatility head on is crucial.

“The industry needs to start living with ambiguity. To borrow from post-pandemic discussions around the new normal, marketers must get used to a much faster rate of change in audience behaviour and move nimbly with economic shifts. Doing so will mean improving their ability to understand and adapt to in-the-moment situations. Strategies and spending plans must be aligned with what consumers want right now and which channels are driving the greatest ROI.”

As third-party data signals continue to fade, making better use of developments in contextual targeting, seller-defined audiences, and tapping first-party data to inform their activities will be crucial, as will forging more direct ties with increasingly powerful publishers.

Michael Nevins, CMO at Equativ

Although times are tough, there are exciting opportunities ahead for brands to connect with their audiences, says Alison Harding, VP of Data Solutions, EMEA, Lotame. What’s important is that businesses avoid getting stuck with the old, and instead do what they can to access new audiences who might be more open to their messaging.

“We’re seeing data buyers take a quality over quantity approach, suggesting that marketers are pruning their budgets with clippers rather than a chainsaw, which is the sensible approach in an economic downturn. There’s ample opportunity for advertisers to make a splash in H2, with events such as the World Cup sure to attract mammoth spend, which has been reflected in our data with ticket sales a leading audience segment.

“Brand loyalties can’t be depended on in a price-conscious market, and the next best customer might not be found where marketers might typically expect. To stay afloat in these choppy waters, they must look beyond their first-party data and find ways to overlay outside insights to enrich their knowledge of both their known and unknown audiences and move quickly on new opportunities these insights reveal”.

Embrace successful formats

Michal Marcinik, CEO & Co-founder, AdTonos

Businesses who invest throughout a recession do stand to benefit from it, but they need to be smart about it. According to Michal Marcinik, CEO & Co-founder, AdTonos, audio remains an underutilised channel despite promising success.

“It is worth noting that investing in smart communications efforts in tough times can give players a competitive edge, especially if they focus on increasing value and enhancing strategies. Audio advertising is an often underutilised solution in an advertiser’s toolbox.

Not only is audio advertising proven to inspire better ad engagement and recall of up to 25% over other formats, it also provides the ROI and trackability that is so important during a time where every cent matters.”

While the outlook ahead is uncertain, there’s still much for the industry to be positive about. With Christmas, the World Cup, and Black Friday around the corner, there are plenty of events to connect with specific audiences. What business leaders need to do is find the best solutions that work for them and double down on the quality of their data, drawing out value and optimising where they can.

Additional industry reaction

Vihan Sharma, Executive Vice President Global Sales and MD of Europe, LiveRamp:

“When facing a precarious economic quarter, pulling back on media spend may seem an enticing tactic in the short-term, but it holds back recovery. For example, case studies have shown that brands which maintained marketing budgets through the pandemic were often the ones which rebounded the quickest. So, the fact that 22.2% of companies surveyed for IPA’s Bellwether report had increased their total marketing budgets for Q3 is encouraging, suggesting this lesson has been learned in part.

“Marketers who successfully implement ‘people-based’ measurement solutions which leverage privacy-compliant, first-party data, and which provide insight across all omnichannel marketing activities, will be best able to stay connected with their high value audience segments. At a time when consumers are looking for more thoughtful experiences from brands, this opens up significant opportunities to strengthen customer loyalty, and increase market share.”

Nick Reid, SVP & Managing Director, EMEA , DoubleVerify:

“There is never a time where responsible investment and the return on that investment is not important. But at this time of economic uncertainty, advertisers and marketers are challenged to make sure they are not only able to measure the impact of their digital investment, but to optimise the performance of their campaigns based on those metrics. Maintaining brand equity and avoiding media wastage – all in a privacy-friendly way – is key.”

Looking towards the future, effectively capturing and measuring consumer attention and understanding how this drives outcomes for brands, will be paramount. IPA Bellwether’s data only reinforces the need to secure consumer attention at scale, helping advertisers get bang for their stretched ad buck.

Nick Reid, SVP & Managing Director, EMEA , DoubleVerify

Matt White, VP EMEA at Quantcast:

“The number one reason ad spend has increased again is aligned to the TV market – and in particular, CTV. During the cost of living crisis, people throughout the UK will have made a concerted effort to enjoy quiet nights-in to save for more difficult times ahead. Simultaneously, CTV offers the viewer more content than ever before. With increased content comes cheaper advertising rates, which then drives more investment. All ships rise and advertising teams are taking advantage.”

Ben Cicchetti, VP of Corporate Marketing, InfoSum:
“A direct consequence of economic pressure is reflective in marketing budgets. As we slump into a likely recession, enabling marketing departments to do more with strict budgets is central to success. It’s here where performance marketing will need to be the focus for the foreseeable future, with wider awareness campaigns taking a backseat. 

“Going forward, marketers will need to use their first-party data and collaborate with media partners to build and target highly customised audiences that can deliver a greater return on ad-spend than scattergun tactics. It will be vital that marketers use technology that both protects the security of this valuable data asset, and also the privacy of their customers.”

Andrew Stephenson, Director of Marketing EMEA & India, Treasure Data:

Despite total marketing budgets increasing in Q3, outlooks are at their bleakest since the start of the pandemic, and we must factor in that growth is propped up by events – the only category of spend which hasn’t seen cuts this quarter, potentially due to the long lead times involved.

“There is a data emergency unfolding in front of marketers’ eyes. As the price of energy soars, economic uncertainty runs rampant and the cost-of-living crisis weakens consumers’ purchasing power, it’s now well-documented that shoppers will be making tough decisions on which products are deemed essential. Brands lacking a sophisticated data strategy will have little visibility of whether their consumers are about to leave them on the shelf – or how effective their campaigns are proving. 

“Marketers must act now and ensure they have a comprehensive data management strategy in place that combines all data sources – online and offline. This is the only way to guarantee that they’re not sleepwalking into a data crisis.”

Phil Duffield, VP UK at The Trade Desk:

“There’s no doubt that consumers are re-evaluating their spending, but brands need to recognise the opportunity this presents. Take streaming for example – despite more consumers planning on cutting back on streaming services, recent research by The Trade Desk revealed over half of Brits are open to a free or cheaper service that is fully or partially funded by advertising. So whilst fears of a recession might be growing, consumers are just as, if not more willing, to engage with advertisements. 

“Now is the time for advertisers who are looking to keep their foot on the accelerator even as growth slows to keep their ear to the ground and invest in data-driven analytical tools to make the most of these opportunities.”

Elliott Millard, Head of Planning, Wavemaker UK:

“It’s interesting the way different channels are seeing budgets removed. With TV bearing the brunt of rampant media inflation, it may not be surprising to see budgets shifted around here. However, it feels like an oversight that the likes of press and OOH are experiencing harder declines than others.

“It’s a trend that we’ve also seen in Wavemaker’s Media Mix Navigator, which allows brands and agencies to interrogate optimum media mixes. It raises warning signs that some brands are shifting to short-termism.

“For savvy brands (with means), there is an opportunity here. There is a cost advantage to be had in underused space. Bearing in mind that OOH is currently an attractive option for bargain hunters as is – UK outdoor advertising prices have fallen by 3.1% since pre-covid times. Additionally, exploiting the channels others are not present in will likely give brands a leg up against their competition.”

Anastasia Leng, CEO and Founder of CreativeX

“The latest IPA Bellwether report comes with a word of caution – budget growth is likely to come to a halt. One would be forgiven for assuming marketers are doing everything to make the most of their spend but the reality is quite the opposite: marketers are wasting millions in ineffective advertising spend by running tens of thousands of ads with a low creative quality score. 

“The reason is simple: thanks to the rise of visually led platforms like TikTok and YouTube, not to mention the onslaught of programmatic video, most brands have scaled content production volume 5-10x in the last few years yet haven’t sufficiently adapted their processes to revamp how they create, adapt, review, measure and learn from all their visual marketing.

“The result? Over 70% of Fortune 500 images and videos produced are not in line with basic creative “first principles,” whether that’s consistent logo usage, product framing, usage of supers and subtitles and more. Together, these principles make up something called the Creative Quality Score (CQS), a KPI that has been statistically linked to improved media efficiency, like cheaper CPMs and cost-per-completed view, not to mention higher ROAS. We can cut our budgets and accept that we will just do less, or we can take this opportunity to explore whether now is the time to try doing things differently.”