IPA Bellwether: Internet marketing budgets fuel growth

Thanks to “relentless” upward revisions in the internet category, UK marketing budgets have witnessed an overall growth rate, according to the latest IPA Bellwether report.

Marketers displayed a “noticeable drive towards digital-based advertising” in Q2 2018, while spending plans for search/SEO marketing also shifted upwards. However, although strengthened on the first quarter, budget growth overall remains “modest”, the report states.

The IPA said the upward revisions to internet budgets have “positively impacted” the overall figures for UK companies’ marketing budgets. While 23% of panellists indicated higher spending plans for overall marketing activity during Q2 2018, just below 17% pointed to lower budgets.

This subsequently yielded a net balance of +6.5%, up from +5.0% seen in the previous quarter, although this is the second lowest since Q1 2016.

Further findings reveal that main media advertising, which includes big-ticket campaigns related to TV, radio and cinema, showed more “bullish” spending plans by marketing executives, following downward budget revisions in Q1.

The net balance was positive overall (+4.9%). “Modest” upward revisions were noted for both events (4.3%) and sales promotion (+4.0%) marketing budgets during the second quarter.

Elsewhere, budgets available for direct marketing, which includes email and telemarketing, were revised lower in the second quarter amid recent GDPR changes.

“You only have to look at the recent hype surrounding Love Island and the World Cup – whether that’s crowding around the big screen, huddling around the box, adding to #GarethSouthgateWould or passing on the ‘It’s coming home’ memes – to realise that consumers are deeply ensconced in screen-based activity,” said Paul Bainsfair, director general, IPA.

“As the evidence shows, television is the most effective medium for advertisers to build their brands and adding digital media to the mix enhances the effectiveness of traditional media. It therefore makes infinite sense that advertisers are investing their money here.”

Despite this overall positive growth, however, with continued Brexit uncertainty, the underlying story still remains one of caution, Bainsfair said, with the latest Bellwether data pointing to the second-slowest marketing budget growth since Q1 2016.

Joe Hayes, an economist at IHS Markit and author of the Bellwether Report, added: “Despite the pickup in marketing budget growth, the latest pace remains weak and only slightly greater than Q1’s two-year low. That said, at a time when industry-wide financial prospects are deteriorating, the continued increase in advertising spend offers a positive development.

“However, latest growth is partly defensive in nature. Margins are being tested by increasing competition and firms are raising budgets largely to sustain market share and profits.

“Since the forecast for the 2018/19 financial year made last quarter which indicated the lowest growth in total marketing budgets for five years, the impasse in Brexit negotiations, combined with panellists reports of rising costs, provide clear downside risks to spending available to marketing executives.”