IPA Bellwether: Industry Analysis

From this quarter’s Bellwether results, it is clear that we are in a period of disruption. The ongoing maelstrom of global and economic issues – not least Brexit – have dovetailed with the changing shape of the advertising industry to reduce marketers’ confidence. However, I believe that this is just a phase.

Despite the gloomy backdrop, I’m convinced that the crucial differentiator in determining who wins and who loses is the same as before: creativity.

In trying economic times, it’s more important than ever for brands to be culturally relevant and properly connect with people; and for that they need to invest in innovative and creative marketing. This is where truly integrated agencies like VMLY&R can help

This data shows the mood of cautious pessimism that is currently driving the industry’s performance. There’s still overall growth in the market but people are aware of the potential for hard times ahead.

From my perspective, losing some of the ‘froth’ from what’s been a period of hyper-growth in online spend is no bad thing – it will help marketers focus on what’s really important and will drive a flight to quality as brands look to focus their spend on the channels that deliver real engagement and ROI.

As budgets come under ever more pressure, driven by macroeconomic turbulence, brands are going to be demanding ever clearer oversight of the ways in which their spend is driving return and that’s where media owners need to focus their efforts right now.”

Michael Todd, head of advertising industry relations, Google EMEA

It’s positive to see growth in a time where political uncertainties have made the business landscape far more difficult. However, the fact that growth figures are their lowest since 2011 tells us that marketers will need to ensure that where they are using their budget, they are doing so effectively. The climate may be murky for some time in the future as Brexit approaches and marketers will need to prove to stakeholders that their work has certain results in uncertain times.

As the internet, search SEO and mobile category showed a net growth of 13.6%, which was stronger than the average budget expansion of the past 37 quarters of upwards growth, it’s clear that marketers still have faith in the proven effectiveness and measurable impact of digital channels.

To confidently ensure this budget is spent as effectively as possible, marketers should now look at how they can experiment with their different digital channels, and use a mixture of different measurement techniques to gain insight on the differences in effectiveness. This will enable them to find the best methods to maximise campaigns according to their KPIs, and will create a strong case for continuing to expand marketing budgets in the future.

As we enter the final throes of Brexit negotiations, advertisers are beginning to tread ever more cautiously. This is evidenced by budget cuts across the spectrum.

On a positive note, spending on TV, radio and cinema has remained consistent with last quarter, showing that advertisers remain confident that broadcast advertising retains its long term value. Despite this, the ongoing shift toward digital is becoming more acute, with many firms choosing to focus the majority of their attention on internet-based marketing, of which budgets have continued to grow since Q2.

With the next six months piqued to be less stable than ever, the priority for advertisers moving into the next quarter must be to maintain the positive brand perceptions they’ve worked so hard to build. Any break in communications can have a detrimental impact on sales in the long term, so ensuring consistency by maintaining advertising budgets, and thinking smartly about when to spend on short-term focused activation channels, will be key to this.

It’s been another tumultuous quarter for media and advertising spend as Brexit uncertainties continue to be a major threat to marketing budgets. However, despite this slowdown, it’s encouraging to see that spend on main media advertising, such as cinema, continues to be steady force.

UK cinema admissions have been up by 3.3% this year, and year-to-date admissions are the best since 2010. In an environment characterised by rapidly changing media behaviours, cinema continues to thrive. With net profits for main media increasing by +4.9% in the latest Bellwether statement, this signals that marketers still see a huge value in traditional means of advertising despite the rise in online competition.

2019 is going to be another bumper year for film and we have every faith that advertising budgets will reflect this strong year for cinema in the new year.

It’s promising to see main media spend largely unchanged this quarter from Q2 – particularly as marketers are exercising more general caution over their budgets. As a sector of main media spend, Out-of-Home (OOH) is showing resilience; something that suggests advertisers are remaining confident about the long-term value of broadcast media.

Proven advertising media like OOH offer unique opportunities to be creative, activate sales flexibly and build brands in the long-term. They have the added benefit of being inherently safe and trusted environments. We expect the outlook to remain broadly optimistic as consolidation in the OOH sector continues – these changes will accelerate tech development and the adoption of common industry standards.

We are seeing positive end of year spend, in spite of continued Brexit speculation, but it could be that marketing expenditure on the whole will continue to be sluggish across Q4, and there will be increased scrutiny on the effectiveness and power of different media.

We’ve seen once again an increase in total marketing budgets, and with digital based advertising driving growth, it’s clear that companies are committed to embracing digital transformation in all its forms.

The report revealed that the adoption of technology will bring in new innovation, which is undoubtedly due to the prolific growth in digital advertising and internet-based marketing. It’s interesting to see that in contrast to the last quarter, we’ve seen a boost in SEO and mobile marketing budgets with a net balance of +5.8% and +1.9% reporting higher expenditure respectively.

Indeed, mobile marketing has huge areas of potential. Our latest research on ‘Localised Marketing’ gives an insight into how individual location data is leveraged by marketers due to the rise of the smartphone with GPS capability. This brings about great opportunities for marketers due to the ability to now personalise adverts to consumers based on their current location in real time, providing a compelling message.

So, with mobile marketing continuing to develop, brands will be able to localise messaging to the right level, as well as become rooted in the local community by having a physical presence.

With main media advertising budgets seeing in further growth, as was the case during Q2, marketers will need to continue to innovate, pushing the bounds of creativity further, as new technologies such as AI are becoming a part of our everyday interactions.

The key findings of the Bellwether Report are unsurprising. The UK market is under huge pressure, and brand owners are uncertain about the mid-term, especially in the retail and property sectors. We already see a trend towards more short-term spending, which is unlikely to change in the near future.

The consistent (and projected) growth in digital marketing spend supports our conviction that online is a significant part of the solution to effective brand-building. The challenge to marketers is not to concentrate that budget too heavily on Google, Facebook and Amazon. The advertising landscape will continue to evolve, with agencies increasingly under pressure from brand owners, publishers and intermediaries, as technology and transparency now start to deliver real benefits and efficiencies. Programmatic has become the default digital advertising delivery vehicle, so the role of the exchanges and data providers (post-GDPR) is under more scrutiny, and will doubtless lead to accelerated consolidation in the industry.

Until we see a longer term resolution around Brexit, the UK economy will continue to cower, lacking in confidence and direction. While it is heartening to note the projected adspend growth into next year, it feels fragile.

Tom Byrne, SVP agency services, EMEA, Merkle

After a period of strong growth in marketing expenditure, there is now a degree of uncertainty due to Brexit and the continued impact of GDPR legislation. However, we see this as a valuable opportunity for brands to prioritise the quality of their marketing campaigns, which will consequently welcome in loyal and trusting consumers. By using compliant, streamlined data, brands will be able to engage in a mutually beneficial conversation with their customers – building a robust and transparent relationship in the process.

The report estimates a pick-up in growth momentum from 2020 – 2022, which aligns with our view that GDPR is signalling a bigger shakeup of the marketing industry, for the better. Indeed, the change of pace we’re witnessing due to digital growth and technological development in advertising, along with greater data security, puts customers back in the driving seat, and allows marketers to gain insight into how they can provide a truly unique and valuable service.

With the report showing a boost in SEO and mobile marketing budgets, we believe that the fruits of tech innovation combined with a data-first mind-set will enable marketers to serve relevant content to consumers, ensuring greater customer engagement with brands.

The successive growth in budgets over six years suggests that brands still appreciate the value of marketing to their business and an upward growth forecast – even a modest one – is a positive sign given the current uncertainty. Given the challenging market conditions, there will be an increased focus on maximising the return on marketing investment and marketing effectiveness will become even more important for brands.

It’s also encouraging to see marketers making upward revisions in traditional media investment as well as digital spend. As demonstrated by the recent IPA Effectiveness wins including Guinness and Baileys, TV continues to play a central role in driving return on investment in both the short and long term.

Brands that invest in marketing effectiveness measurement, will be well placed to manage the forthcoming uncertainty by having the right tools to respond with speed and agility to changing market conditions.

Despite uncertainty weighing heavily on marketing budgets this quarter, Search continues to act as an effective barometer of digital growth, the latest Bellwether report shows. Indeed, while overall investment in digital continued to increase, a net boost of +5.8% in search investment over Q3 proves that even as we enter the final months of decision making over Brexit, marketers remain confident that digital channels – and search in particular – hold huge potential to create effective and relevant advertising strategies that resonate with even the most money-conscious consumers.

This noticeable uplift in spend has been driven by ease of use and clear accountability and we believe that these factors are going to be drivers for the further growth of intent based targeting solutions over the next 18 months. Marketers are increasingly identifying consumers via their real time purchase intentions and this will play out in significant growth for the likes of Amazon and others. AI and technology advances present a major opportunity to improve transparency, tackle brand safety, improve targeting and make it easier for advertisers to spend programmatically with the sector. This will result in further gains in share of spend versus other media.

Marketers continue to be cautious with their budgets this quarter, but this is fairly unsurprising given the ongoing uncertainties related to Brexit.

In spite of this, internet channels continue to soak up spend, reflecting an ongoing faith from marketers in the digital world’s unparalleled ability to deliver powerful, creative and contextually relevant brand messages – even as consumer confidence plummets.

As we enter the next quarter, being able to maximise the effectiveness of investments, both current and future, will clearly be essential. The priority for advertisers must be to innovate and remain creative in an increasingly competitive marketplace. Keeping up with consumer habits online will also be key – as search becomes both increasingly visual and voice-based, new tools will be needed to understand the context of the web, how best to engage audiences and more accurately target them. Until we see any long-term solutions around Brexit, it’s likely we’ll continue to see a drag on marketing expenditure.