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Earnings season for Big Media just ended and the takeaway is that things are going to get worse before they get better.

Marketers are jittery about advertising. Media owners wonder whether the future of their businesses will be less profitable. Even the seemingly invincible platforms are making cutbacks. If there were any doubts about the severity of the financial crisis then, there aren’t now. 

How severe? Interest rates are rising, forcing central banks around the world to throttle the flow of money, which means the economy slows. That’s compounded by Russia’s invasion of Ukraine and the reverberations it’s sending across supply chains and consumer sentiment. Oh, and the largest single driver of global economic growth — China — is sputtering as its strict covid stance wrangles with a pervasive virus spike and widespread lockdowns. 

Worse still, so much of what’s happening is out of marketers’ control: public sentiment, government fiscal policies and — probably the most complicated factor — the unexpected contortions of the financial world. Predicting the future is, obviously, a fool’s errand. Not that senior marketers aren’t trying. On the contrary, many are trying to get out in front of the imminent economic storm. 

Procter & Gamble took ad dollars out of its pot for Q1 and poured them straight into its bottom line. Coca-Cola will do more advertising to try and justify price hikes as and when they happen. Peloton has pumped the brakes on ad dollars so far this year. They’re not in a recession yet, but that hasn’t stopped marketers preparing for that eventuality. 

So much so that in conversation after conversation with ad execs at the Advertising Week Europe and Upfronts this week, everything kept coming back to one word. Well, one word besides cuts and uncertainty — anxiety. 

“Most of the first half of the year has been relatively strong from an economic standpoint and that’s fuelled a fair degree of advertising over that period, ” said Chris Skinner, president of UM’s EMEA business. “The second half is going to be different as there’s a good chance there will be a broader downturn with people becoming more cost conscious in an economy that’s more restrictive.”

There is, of course, plenty marketers can do to prepare. 

In the short term, maybe they spend more on ads to justify price hikes in an inflationary marketplace. Perhaps they create more flexible commercial structures with their agencies to manage any volatility of spend, or rise in media inflation. And some might be thinking even further ahead, to what bets made now could pay off come the rebound. All these options and more are being considered by marketers at the moment, said Ryan Kangisser, managing partner for strategy at MediaSense. No one wants to be caught off guard if this downturn flips into a rout.

Ad spending is reflecting that angst. Or, at least it’s starting to as advertisers try to hold on to their media dollars for as long as possible. 

“We’re not seeing advertisers cancel budgets — it’s too early to do that,” said Dave Mulrenan, head of investment at Zenith U.K. “There is, however, a cautionary note in a lot of the plans we’re working on now. Clients want to hold on to as much of their budget as possible while they wait to see what happens.”

Cue lots of worried media owners. After all, media is an incredibly hard business even in the best of times. And it’s obvious those times are over. 

The glass-half-full takeaway from larger publishers at Ad Week Europe: their businesses should at least still see an expansion. To them, macroeconomic disruption accelerates change that creates grounds for new winners to emerge. 

A bleaker conclusion came from media buyers at the Upfronts stateside, who warned that the downturn will suck a lot of money out of the pockets of broadcasters. In fact, there’s a growing realization that many of these macro headwinds will remain in Q2, Q3 and potentially into 2023. As one media buyer explained: “I don’t think I’m going to find a whole bunch of money coming over the transom like I’ve done the last four or five years.”

The more this happens — advertisers moderate or slow spending — the more their media mix will shift in emphasis too. If anything, the volatile state of the economy is impacting where media dollars go just as much as how much is spent. That could mean good news for some businesses and bad news for others. It all depends on where they are in the ecosystem and more broadly the world. The state of TV advertising in Q1 is a case in point. Overall, it was fine. Locally, however, it was uneven. 

Total linear TV ad impressions among top U.S. CPG advertisers were up 13% year over year in Q1, while total impressions among top U.S. automotive advertisers were down 13%. Downy, the top U.S. CPG advertiser, drove a particularly high increase in impressions in Q1 2022, running both English and Spanish language ads.

In the U.K, the trends were reversed, with the CPG category down 19% and automotive up 11%. Several luxury automotive advertisers supported the increases in the U.K, including CUPRA, Lexus and Polestar, though the number one advertiser Hyundai saw the highest increase.

”Q1 was a bit of a mixed bag as it relates to linear tv advertising both in the U.S. and the U.K.,” said Dallas Lawrence, head of brand at Samba TV, which analyzes viewership data from millions of smart TVs. “Supply chain issues and increasing interest rates kneecapped auto sales in the U.S. driving decreased automotive ad spend. And in the UK rising prices have stalled consumer demand for packaged goods leading to a nearly 20% drop in CPG ad spending in Q1.”

Bottom line: No one knows what’s going to happen — least of all marketers. 

Rajeev Goel, CEO of publicly traded ad tech vendor PubMatic, pointed to the state of the U.S. economy to ram home the point: “It shrank in the first quarter. That left people wondering whether it was an aberration or a sign of the new normal.”

Marketers know in their guts, as well as their brains, that they can’t afford to cut spending entirely — not when people are still showing a tolerance for high prices amid rampant inflation. They can, however, be more cautious, opting to slow or even delay spending as they balance the need to persuade consumers not to trade down to lower-priced competitors with the need to offset some of their own higher costs or increase profitability. In other words, inflation is additive to advertising as a whole until it isn’t. And there’s the kicker. No one can quite figure out the trigger for the likely blowout across the economy. 

“Marketers will start to get concerned if they see signs that consumers are trading down to cheaper alternatives like house brands or not buying at all. The other big signal would be a major cooling off of the currently red-hot job market,” Chris Vollmer, managing director at strategic advisory firm MediaLink.

Clearly, there’s more pain to come. But there’s always a rebound. Right? The biggest economies in the world are still fundamentally strong: people — aside from the lowest income levels — are still spending, the largest advertisers appear ready to have good balance sheets and there were some encouraging outlooks to emerge from the latest earnings season considering the grim forecast. Until there’s a rebound, the agecny holding companies are banking on the diversifications they’ve made in recent times to see them through. 

“In short: 31.5% of the Group and 36.5% of Dentsu International’s revenues now come from Customer transformation & technology – a structural growth area that is much less cyclical than media & creative,” said a spokeswoman at Dentsu. “As the portion of this business grows we get greater visibility and confidence in our full year guidance.”

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