Even digital will feel the pinch as media buyers cut forecasts amid rising wave of anxiety

Just in case it wasn’t already clear: ad spend for the second half of the year is being significantly revised and, in some cases, significantly reduced as marketers brace for further economic upheaval.

The signs have been piling up over the past quarter: slowing TV advertising, changing ad spend forecasts, including the first ad breaks, some of the hottest names in the industry bracing for turmoil.

With the latest Bellwether quarterly report from the Institute for Practitioners in Advertising, published on July 21commentators can add survey data from 300 of the UK’s leading advertising media companies to back up such testimony.

The report, which outlines business advertising spending intentions and financial confidence in the UK, indicates that recession fears are growing rapidly among marketers.

Here’s a breakdown of the numbers:

  • About a quarter (24.2%) of companies surveyed increased their total marketing spend in the second quarter, while 13.4% saw budget cuts.
  • Mainstream media – or advertising above the line, including television – saw their advertising budgets stagnate, ending a year of growth. At 0.0%, the net balance is down sharply by +9.4%. Growth in online (+4.4%, vs. +18.6%) and video (+0.8%, vs. +9.0%) ad spend continued, albeit much less than in previous quarters.
  • The financial outlook for own companies has moved into negative territory for the first time since the third quarter of 2020. A net balance of -9.5% for companies signals pessimism about the performance of their own company, the most negative in two years .

That said, however, advertisers are not drastically cutting ad spend or reacting to macroeconomic concerns yet. Yes, they’re cautious about what happens next, but for now, they’ll keep spending.

“Amid a deteriorating economic outlook for UK businesses, the continued growth in total marketing activity is encouraging,” said Joe Hayes, senior economist at S&P Global Market Intelligence and author of the Bellwether report. “However, the stagnation in major media marketing budgets is a disappointing result of the second quarter survey and suggests that concerns about the outlook are weighing on decision-making. The risks are clearly on the downside, as the A deepening cost-of-living crisis is weighing on disposable incomes, while businesses face tough spending decisions at a time when their cost burdens continue to inflate.

The bottom line is that pessimism is reaching a fever pitch among marketers.

There are promising economic signs to hold on to, ranging from strong employment to buoyant consumer spending. But global growth and earnings expectations appear to be in a constant state of downward revisions, fueling recession expectations. Conflicting forces like this would challenge even the most ardent optimist. There are tough choices for senior marketers to make.

“Given the current economic climate, cuts in media spending are to be expected. But with so much financial uncertainty ahead, brand advertisers need to be able to identify where to make those budget changes and by how much,” said Jay Stevens, CEO of media data management company Redmill Solutions. “These often complex decisions can put pressure on CMOs; they need to have a clear view of their global media data to justify their spending and make informed decisions on any cuts.

Commitments maintained, forecasts revised downwards

How close senior marketers are to these calls will become clearer as we delve deeper into the earnings window. More often than not, CEOs will use these quarterly earnings updates to tell analysts whether they see advertising as a cost to cut or a cost to grow during a downturn. At this point, it looks like some companies are looking to make cuts sooner, not later.

Sources from UK-based media owners told Digiday that as speculation grows of a significant downturn in the economic climate there, some media buyers say advertisers will press “pause” on traditional channels. such as print media and television.

A senior media agency source told Digiday that their company is forecasting a recession as customers moderate their spending on offline channels and seek to cut fees. Although, in an indication that outright panic hasn’t set in yet, the downturn is stalling before rolling back past spending commitments.

For some, it is still a “canary in the coal mine”, with the second half of 2022 likely to be a testing period. Even Alphabet and Meta, the parent companies of the two biggest media companies, would start to slow down in terms of overheads and personnel.

Supply chain issues exacerbated by Russia’s invasion of Ukraine have caused advertisers to cut ad spend (automakers, in particular). Magnite management cited the trend as a headwind during a recent earnings call, and experts predicted it would stretch through 2023. In fact, TV ad spend among the top 10 advertisers automobiles have fallen this year.

A separate source from an agency holding group noted slower growth in pay-per-click and programmatic spending since the second quarter, although they were up slightly from the previous 12 months.

Speaking separately, Advertisers Perceptions Chief Forecasting Officer Eric Haggstrom told Digiday he expects to see a partial drop in programmatic spending followed by an “even sharper rebound” in 2023, as marketers were probing the transparency of these means of media investment.

Indeed, a 2020 PricewaterhouseCoopers transparency study commissioned by the Association of National Advertisers found that 15% of marketers’ spend in the UK simply couldn’t be accounted for.

Meanwhile, paid search campaign budgets — normally high performers for advertisers determined to prove how their ads drive performance — are flat compared to 2021, according to the same source.

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