Industry reacts to AA/WARC’s downgraded adspend forecasts

Michelle Morgado, director of media UK, Ebiquity

The latest AA/WARC expenditure report continues to demonstrate the fragility of UK advertising due to the impact of Covid-19, with further revisions being made for 2021 and a clearer picture of the true effect on 2020.

It has made clear the harsh reality of the impact of the ongoing pandemic on the UK ad industry, whereby it suffered its worst ever quarter on record, with a drop in adspend of 33.8% in Q2 2020 compared to the same period in 2019.

The forecast downgrading may not come as a surprise to many, with the Government imposing newly formed localised lockdowns over the winter, the ongoing Brexit negotiations, and ultimately the end of this pandemic being impossible to predict. UK adspend will take some time to bounce back.

Digital marketing continues to remain resilient during this time as consumers shift media consumption online, although not all have benefited. Google recorded its first ever loss, albeit minimal. Within their financial report, it is evident that there are positive signs for growth of YouTube ad revenue. Social media giant Facebook has shrugged off the impact of the pandemic with revenue up 11% YoY ($18.69b) and monthly active users up 12% YoY.

Marketing will be critical to recovery efforts after this crisis. With this in mind, incentives such as the Advertising Association’s tax scheme will go a long way in encouraging advertisers to spend. However, new HFSS restrictions poised for 2022 will only slow down growth, removing £200m from the broadcast market. As such, brands need to remain agile, continue to optimise regularly and need to be in tune with consumer sentiment, spending power, and consumption patterns.

Lee Lythe, chief investment officer, Spark Foundry

Of course, we all want 2021 to deliver us a full recovery (not just in the world of advertising), but let’s be realistic, recovery will take time. The AA/WARC forecasts paint a picture of 2021 revenues bouncing back to 2019 levels, but with a shape that reflects the digital audience acceleration we have encountered this year. Brands are keen to innovate and seek out opportunities to adapt their plans to these new behaviours.

As such Video on Demand was the only medium in 2020 not to experience decline (+1.4%) and this trend is set to continue in 2021 +19.5%. It’s great to see that revenue in this case has followed the audience with commercial VOD platforms boasting audiences +45% YoY during the lockdown period.

However, after an extremely bleak year for the film and entertainment industry, it’s the 138% growth number in cinema that I’m rooting for!

Sarah Baumann, MD, VaynerMedia London

Adspend is falling overall because there are, unfortunately, brands that have really suffered this year. Certain sectors, such as hospitality, have been hit harder than others while others, such as retail and beauty, have been able to adapt. Some have quite simply taken off – home fitness, DIY, alcohol, DTC food and beverage, for example. The positives we are seeing are that brands willing to invest now will reap the benefits later. Being visible, useful, entertaining, or just present when other brands are turning the tap off, is a risk worth taking.

The ability to tie your efforts to tangible business results and show accountability for what’s working is any agency’s most seductive asset right now. We put a huge focus on constantly optimising campaigns and reacting well to what is working. If it works, do more of it. This approach is what we’re hearing that clients need: fewer risks, smaller bets, and measurable, effective communications.

What this also means is that brands and agencies are being forced to examine their social channels and digital ecosystem, which could move the whole customer shopping experience forwards. This is crucial at a time when commerce continues to move online. For brands who can revise their online presence, ecommerce and creativity are going to merge at a more accelerated pace.

Rik Moore, head of insight, strategy & planning, The Kite Factory

While today’s results are hardly surprising, they’re the green shoots in a slow recovery for the UK’s advertising industry. Resilience and a belief in our talented teams will help brands get the best value they can in these trying times and these figures show a strong improvement when compared to Q2 of 2020 – the worst quarter on record for our sector.

We’ve learnt a lot since then, and brands have exercised caution at varying degrees. With a 10.5% drop predicted over Christmas, we need to remember that brands have now learnt not to pull their advertising spend altogether and take comfort in the little victories.

Whatever happens, we’ve been through a really dark period already this year and have learnt valuable lessons from that. Whilst the horizon might feel a little further away than we’d like, we now have the luxury of hindsight on our side.

Jeremy Hine, CEO, MullenLowe Group UK

It’s no good sugar-coating things – AA/WARC’s latest report paints a gloomy picture as we approach the end of 2020. However, it’s not necessarily doom and gloom across the whole picture as we look forward to recovery.

Brands should look beyond the numbers and keep in mind the effectiveness of truly integrated approaches to campaigns – being channel agnostic and seeking instead to bring brilliant ideas to life in intuitive ways.

Although some trusted media are dipping, like out of home (due to people staying indoors more) and cinema (due to unfortunate closures), these are robust, proven channels for reaching people. They will bounce back so shouldn’t be dismissed.

Agencies are proving to be hugely beneficial to helping their clients remain strong, and we believe the strongest approach is ‘hyper-bundling’, where the best teams across multiple disciplines work on a brand’s brief. This will be more important than ever as clients navigate rocky terrain – but I’m confident our industry has the creativity and sensitivity to succeed.

Federica Bowman, global CEO, FirmDecisions

The latest AA/WARC report shows a significant change in media investment across different channels from one year to the next. Advertisers have had to react quickly to mitigate the risks of the changing situation, but they’re now preparing for a more measured approach to 2021.

The pandemic may have had implications on agencies’ abilities to service their clients, particularly if client-based income has fallen, and their commercial deals with vendors could have been affected by the inconsistency of media spend year on year.

Heading into 2021, advertisers should ensure that they have a strong understanding of how these fluctuations could impact their agency partners’ ability to meet their contractual obligations and ensure they have the appropriate governance in place to monitor.

Kevin O’Farrell, associate vice president, Analytic Partners

We know that during a recession and times of economic instability, brands that maintain their marketing presence benefit from the reduced presence of competitors in market, the ability to secure better rates for premium inventory, and the increased brand messaging opportunities as a result. Despite this, the results today showing reduced ad spend are hardly surprising.

It has been a bleak nine months, but this is not the first time that brands have had to reinvent themselves and their marketing strategies. Marketing effectiveness is a constant art, re-balancing media mix and channels to include more product, performance, or promotional marketing in tune with emerging trends and demands – including ROI.

Maintaining an omnichannel strategy is vital and will be paramount to recovery over the next few months and into 2021. As we hurtle towards Christmas, brands need to be smart with their data insights and channel mix. For example, although online consumer spend has skyrocketed, it does not automatically mean online is the only place they are consuming their media. In fact, our data shows that TV can be the biggest driver of website traffic.

So brands shouldn’t necessarily ditch all offline activity if they want to drive ecommerce this festive season.

Emil Bielski, MD, Croud UK

The industry is on the slow road to recovering from a really tough year. Recent research from Serpico by Croud shows that half of UK digital marketers lost in-house talent due to Covid-19, and WARC’s figures indicate we must brace ourselves for more bumps in the road.

In an environment of reduced budgets and a decreased talent pool, marketers are having to work smarter than ever before to cut through. As the festive season approaches, we should not simply pin our hopes on quick wins during the holiday period, instead we should look long term and plan for 2021.

We have found that the clients that are willing to be adaptable with ad spend, flexible with budget, and are willing to take risks in exploring new areas of digital are those that are seeing the most promising results. When volatility is the norm, responsiveness is going to be the key to success – the ability to adapt to changes in consumer behaviour and to scale up when needed.