Wednesday, November 30, 2022

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    World’s biggest advertisers divided on how to spend during global slowdown

    Research into the likely ad spend of the world’s biggest brands finds a third plan to cut budgets.  Continuing The Drum’s Globalization Deep Dive, we dig into the findings. 

    Flexible budgeting and a focus on performance spend are likely to dominate marketing budget discussions next year. Research demonstrates that jitters among the world’s biggest advertisers are likely to hit agencies – particularly those with specialties outside of digital.

    A new study from the World Federation of Advertisers (WFA) and Ebiquity suggests that the world’s biggest advertisers are divided on how to respond to a global economic slowdown. The volatility from the ongoing Russian invasion of Ukraine plus lingering impacts from the Covid-19 pandemic are placing increased pressure on advertisers, leaving them split on how to respond.

    The study assessed the intentions of 43 companies, including five of the world’s top 10 advertisers by spend (collectively, the top 10 invest more than $44bn in advertising on an annual basis). 

    Just under a third (29%) of those surveyed plan to decrease spend next year, while a similar amount plan to increase investment and the remaining 40% say they are seeking to maintain current marketing budgets. The results speak to a lack of certainty among advertisers about how to proceed.

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    Stephan Loerke, the chief exec of the WFA, said: ”It is encouraging to see that a number of clients are planning on standing firm and taking heed of the well-taught lessons of previous recessions, which show time and again that those who continue to invest or increase their ad spend emerge stronger from periods of economic uncertainty.”

    His comments echo those of UK trade body the IPA, which has urged the UK government to encourage advertising spend in the face of a tougher-than-expected cost of living crisis. Its own predictions for the years through to 2026 have been cut significantly, with the forecast for 2023 cut from 1.2% to 0.5% growth.

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    The survey did, however, find there were notable differences both between regions and among marketing mediums. In EMEA, a third of respondents agree there could be a decrease in spend next year, while in the Asia Pacific only 15% envisage a slight decrease. Meanwhile, 35% of those APAC respondents plan a slight increase.

    Digital spend looks likely to be among the big winners from the readjustments. As advertisers feel the need to hold back some spend due to uncertainty, the use of biddable or auction-based content is likely to increase. Crucially, only 9% of respondents are planning to increase the proportion of budget allocated to upfront commitments.

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    According to the research, the big winner will be digital, with 42% saying they will increase spend either slightly or significantly, with offline media such as TV, radio, print and outdoor likely to suffer.

    Meanwhile, nearly half of respondents are planning to cut offline investment and a quarter are looking to make a significant cut (of more than 10%) in print spend. Those accelerations of long-term trends are likely to worry newspaper and magazine publishers, many of which are still over reliant on print advertising revenue.

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