Bellwether reaction: Advertisers told to hold their nerve
The uncertain economic and political climate has continued to weigh on industry financial prospects, according to the latest IPA Bellwether report, with confidence at its lowest level in four years.
Here, senior figures from News UK, Mindshare, Sociomantic, Bloomberg, Sky Media, REaD, Impact Radius, Exterion, Capture, Zenith and Jaywing reflect on what the results mean for the industry.
The Michael Fish moment has been well documented about how wrong the forecasters were about the economy post the referendum decision and it’s great to see that the great British public and business have turned a gloomy decision into a positive result.
Clearly, there has to be caution as we approach the reality of Brexit and certainly consumer confidence will be impacted but the underlying business performance is still apparent.
Advertisers need to hold their nerve during this uncertain time and continue to invest in areas that help their brands sustain for the long-term. For those that do, when consumer confidence begins to grow again, they will find a steeper return to growth.
This isn’t about driving click-throughs and likes but more about reaching highly influential and engaged consumers in trusted, professionally curated media, that will determine our path to continued growth.
Chris Cardew, head of strategy, Mindshare
The positive story told by the Q4 Bellwether is a reassuring one and proves that despite these difficult economic and societal times, business and brands are continuing to weather the storm and maintain consumer confidence, albeit with a level of cautious optimism.
As a whole, it’s been a good quarter for media and marketing. For the majority of the big retailers, such as M&S, Christmas delivered bumper results. This was supported by high profile marketing campaigns and investment, demonstrating their confidence in consumer spend. Similarly, Amazon continued to change the game with its service proposition, also supported by significant marketing investment.
While digital continued to see growth, TV ad spend was sustained proving the value and importance of the medium in the modern day media mix. On the social side, despite the fake news drama, Facebook continued to sweep up the lions share of social budgets.
This year it is likely we will see brands sustain marketing investment as they seek to provide a much needed comfort blanket for the uncertain times that lie ahead.
Towards the end of 2016, we saw advertisers, technology firms and consumers forge ahead despite ongoing political and economic uncertainties, both at home and across the Atlantic. IPA Bellwether’s Q4 2016 report confirms that advertisers had ‘markedly’ raised their marketing budgets – a prudent move should they miss out during the most competitive season of the year.
Likewise, several tech firms displayed confidence in commercial prospects by increasing investment. Companies like Snap (Snapchat’s parent company) recently announced that it is setting up shop in London as its European headquarters. Similarly, Google is expanding its London base to a colossal scale that it is creating over 3000 new jobs in the capital.
Finally, what we’re seeing in the programmatic space is reflective of IPA Bellwether’s report, with advertisers increasing spend in the ‘internet’ sector, pushing towards online channels that deliver ROI.
They know that thanks to programmatic technologies, marketing budgets can be held accountable. And indeed, proving that consumers also hadn’t shied away from spending, we saw positive results for many of our partners as 2016 drew to a close.
Alex Wisch, TMT analyst, Bloomberg Intelligence
Despite doubt over the last few months and what we would expect to be a much larger decline in ad spend with businesses being more careful, the IPA Bellwether report shows UK advertising has held up well so far, although a significant downturn expected through 2017.
This is likely to accentuate long-term changes in trends in the allocation of media expenditure. In particular, more print to digital migration; and within digital, more desktop to mobile migration, with emphasis on social advertising, which is perceived as being able to deliver better value for money.
In terms of sector, main media advertising has taken a surprising turn, beginning to recover budgets in Q4, compared to the decline in Q3. Regardless of this positive quarter, with the uncertain terms of the ongoing proceedings of Article 40, investment is likely to be delayed, while consumer spending is forecast to slow.
Understandably advertisers will be more cautious when deciding where their marketing budgets go and will be demanding clearer ROI to prove the worth of the mediums they spend in.
Research has found that assumptions of average TV viewing is 20% less than it actually is, with live viewing assumptions underestimated by nearly 40% (87% of TV is still watched live). Whether it’s I’m A Celeb, Westworld, Bake Off or Buster the Boxer, TV is still the talk of the town.
It’s the collective responsibility of all the TV companies in 2017 to better educate our customers about how strong TV viewing is and how robustly it’s measured relative to other media.
I envisage in 2017 the three TV sales houses working ever more closely to market the continued fantastic brand building capability and trusted environment of television – this at a time when other media attempt to take revenue with products of lesser quality and dubious measurement.
Jon Cano-Lopez, chief executive, REaD Group
It’s positive to see the year end on a high in terms of overall marketing spend, however, it’s disappointing to see direct marketing budgets have not followed this upward trend. In such a competitive market, especially in uncertain times, marketers must work even harder to ensure that they are forging profitable relationships with consumers; something that is achieved by adopting a fully multi-channel approach, maximising the best opportunities to target customers in the most lucrative way.
The marketing landscape has changed dramatically in recent years. Today, where relevant, a clever piece of direct mail has radically different cut through than it did in years gone by. The benefits of these channels should not be overlooked.
Bellwether attributes its downward projections in 2017 to uncertainty over the impact of Brexit negotiations, despite the fact that the industry has remained resilient throughout 2016. Businesses with concerns around the impending General Data Protection Regulations should seek expert advice on compliance to ensure that this does not hinder their progress in the coming year. It would be good to see marketers holding their nerve during this period, reflecting confidence in consumer spending and remaining optimistic against these predictions.
Marketers should use this as an opportunity be brave and seek to gain advantage at a time when others may be treading cautiously. Those that do invest in the marketing mix will reap the benefits of a more coherent strategy and more valuable customer relationships.
The Bellwether Report shows that the digital ad industry is gaining strength in terms of its position and in levels of spend, which is great news for all involved in digital ad trading through display, video and mobile.
With this increased spend has come a need for higher levels of transparency as there is significantly more at stake now. Moreover, it is unsurprising that with Brexit negotiations continuing, there is a level of uncertainty in the industry.
Brands therefore need to be assured that the increased budgets spent on digital media are actually being viewed by real users and that the entire customer journey can be correctly attributed, especially when the complexities of programmatic trading are involved.
Shaun Gregory, chief executive, Exterion Media
Given recent events – and of this week – it’s completely understandable that there is going to be market uncertainty over the next few months, and that this may well have a negative impact ad spend over the course of 2017. But we have a strong and resilient industry, and the expectation that 2018 will see more sustained ad spend growth reflects this.
What’s clear is that we’ll see a continued transformation of the industry, with most media owners recognising the need to digitise their business. Only then can you offer seamless experiences for your customers and compete with the likes of Facebook and Google.
As the report highlights, it is clear that uncertainty is up which means confidence is down. In the grocery sphere the affect is significantly less noticeable than in high value markets such as housing, cars or electrical; after all the risk when choosing whether to buy an extra packet of biscuits is negligible in the scale of risks you can take as a shopper.
There will of course be some tightening of belts in shopper spending and down trade in luxury FMCG categories is inevitable. However, whilst some shoppers spend a bit less on a bottle of wine, there will also be those entering grocery buying dinner for tonight that may otherwise have eaten out. In fact, sales in grocery grew year on year over Christmas 2016, driven by a growth in premium categories.
As we move in to 2017, contrary to the report findings, because of the relatively stable demand in grocery we don’t foresee a decline in adspend within FMCG as a result of Brexit. If anything, since Brexit, we are actually seeing a growth in spend as a result of greater knowledge, understanding and measurability of advertising at the point of purchase.
Jonathan Barnard, head of forecasting, Zenith
The latest Bellwether figures showed an increased engagement with mobile advertising, with marketers upping their spend in the area by 3.9 per cent. Mobile continues to play such an important role for brands to engage with their audiences, so this is a good sign considering the previous report predicted a decline of 2.6 per cent.
Indeed our own figures predict that mobile advertising will overtake desktop in 2017, and mobile will likely account for 60 per cent of all internet advertising by 2018.
All brands need to become mobile first in their communications to ensure that they continue to reach consumers in an increasingly digital and mobile landscape, and that they consider the full mobile ecosystem, such as smart watches and activity trackers, to do so.
It is encouraging that companies again increased budgets last quarter, reflecting an air of consumer and market optimism while we’ve awaited further comment on Brexit. With Mrs May indicating the government’s stance just yesterday and forecasts of increased inflation, further market and economic reaction will continue to develop. Meaning that while there is optimism, there remains uncertainty, which is reflected in the 2017 forecast adspend decrease.
It is therefore likely marketers will continue to focus on measurable activity to ensure budget is committed wisely. What’s more, the marketing and media landscape continues to advance so it’s crucial that marketers have their finger on the pulse of all the latest developments and the infrastructure to respond.
Advances in data science, machine learning and AI all continue apace with the need for a solid data asset, advanced cross-channel analytics and programmatic delivery of engaging creative increasingly a necessity to remain in the game. This approach will eventually become a widespread MO across digital and traditional channels.
We particularly note the increase in both search and mobile advertising, which is an important reflection of both consumer behaviour and industry shifts, such as Google’s most recent algorithmic reward for good mobile customer experiences. There is little doubt we are increasingly mobile-centric, particularly among demographics that are becoming the biggest spenders.
Sue Todd, CEO Magnetic
It’s heartening to see that marketers are shrugging off the uncertainty caused by geopolitical factors and have revised their adspend upwards. The growth in ‘main media spend’, which is that of established media, is particularly pleasing to see, as it demonstrates that this growth is spread across the media mix rather than purely fuelled by the rise in search and social.
It suggests both an established media in a healthy position, combined with a continuing focus on innovation. Strong examples of this can be seen in the magazine sector with initiatives such as Empire Live, The Esquire Townhouse and Cosmopolitan #FashFest which allowed brands to work with the magazine brand in an entirely different way.
Alongside these big ticket ideas, small scale innovations and creativity are showing the real value of established media.