IPA Bellwether: Industry analysis

While some marketers may interpret the upward trajectory in budgets as continued confidence in the advertising industry, it also shows potential signs of an industry ‘proceeding with caution’ amid a politically and economically uncertain environment. Lack of confidence in our ability to predict key indicators may be fuelling this behaviour. Just yesterday the economic community – including the BoE – was surprised by the drop in inflation from 2.9 when it was last recorded in May by the ONS to 2.6.

The danger? A short-term approach to marketing investment focused on more immediate wins to justify the budgets. The rise in internet budgets could signal that marketers are directing more investment to channels aimed at sales activation, potentially at the expense of long-term brand building. Likewise, we also need to recognise that technological advances have created new opportunities for internet channels to support brand building strategies, especially for the young.

My recommendation to fellow marketers is to keep calm and carry on. Now more than ever, we need to create plans that allow flexibility in tactics for the short to mid-term to be able to cope with ongoing uncertainty. This must be balanced by a clear strategic objective that focuses long-term marketing investment on nurturing the brand. We no longer have the luxury of favouring one over the other.

It seems U.K. marketers might be becoming increasingly cost conscious amid growing concerns over their company’s financial prospects.

Continued net increases in Internet budget allocations, while net upward revisions to main media budgets have levelled off slightly since the start of the year, according to the 2Q Bellwether Report, could suggest cheaper, performance-driven marketing is being prioritized over brand building.

Interestingly, this is in spite of the recent backlash against YouTube that helped fuel widespread concerns over digital’s effectiveness. While this may not bode well for TV advertising, broadcasters’ arguably safer online ad offerings could benefit, though Google and Facebook continue to take the lion’s share of online ads.

We need to look at the increase in digital advertising spend two-fold. Firstly we know that businesses have to justify investments at board level based on short-term returns, in which sense digital can clearly deliver on a tangible ROI. However, this does not mean we should overlook the role digital can play above and beyond the final push for conversion.

Digital is just as key to long term brand building as it is to short micro targeted sales drives. Additionally, digital gives marketers the flexibility, measurement and ability to optimise during tough times, where perhaps other investments seem more daunting – especially as their business may drastically alter during the span of the campaign. This combined with changing consumer behaviours are just a few reasons why investment in digital at its highest rate in a decade.

In terms of a macro context, Brexit and overall political uncertainty is undoubtedly top of mind for marketers – in fact, we recently carried out some research that revealed that just 17% of marketers think that Brexit will have a positive impact on their business. It is therefore more vital than ever that businesses don’t lose their heads and equip themselves with a roadmap to make informed and logical business decisions that will lay the foundations for sustainable growth and increase performance long term.

The substantial increase in marketing budgets is a sign that companies are turning to marketing departments to drive differentiation and customer growth in an uncertain consumer environment. Brands that manage their customers from the top to the bottom of the funnel will still be able to grow sales and share in that environment.

For the publishing industry, we hope that this investment also values the context that advertising is placed in. We also support the growing (and reasonable) demand for consistent auditable third party measurement from all media companies, including Facebook and Google.

It’s great to see resilience in the market, though it’s understandable that there will be uncertainty over the coming months, as we await the impact of the recent general election and the unknown effect of Brexit negotiations.

Despite this, the latest data shows an upward revision to UK marketing budgets, the largest expansion for just under a year. Albeit modest, it is encouraging to see that ad spend is still expected to grow between 2019 and 2020.

It’s clear from this report that marketers are being more vigilant about the type of advertising they invest in, and it is more important than ever to form partnerships that lead to greater engagement and most importantly, return on investment. The most recent figures released by the Advertising Association and Warc revealed digital formats continue to drive growth and data will play a leading role in delivering this, especially within the out-of-home industry, as we deploy new technologies to become even more accessible and accountable for marketers.

Given the media landscape is evolving at such a rapid pace, the industry must continually strive to understand consumer behaviours and needs – and invest in the right ways. Not do ‘digital for digital’s sake’, but look seriously at where we can provide the most relevance for consumers. Our audiences matter and if we get that right, new opportunities for growth will come in spite of what lies ahead.

In such an unpredictable economic climate, it makes sense that marketers are revising up their digital budgets. The internet has always been a great place for accountable, activation driven advertising and increasingly it’s also a great place to support effective brand building.

In the UK, we’re world renowned early digital adopters and in uncertain times, it’s inevitable that people will turn to the web to shop around before making purchase decisions as well as for news and entertainment. UK advertisers are clearly responding to changes in the behaviour of their customers and the news bodes well for the future. Whatever else may be, the UK is set to continue being a global leader in advertising.

So the latest Bellwether report indicates that digital budgets are predicted to see the biggest rise for 10 years but set against a backdrop of prevailing economic headwinds and the lowest level of marketer optimism for four and a half years. There seems to be something of a dichotomy in this, and I think it is a further reflection of the pivot towards the shorter term, activation centred approach recently revealed by the IPA in its excellent report ‘Media in Focus – Marketing effectiveness in the digital era’.

The report highlights the ratio of brand to activation activity has flipped from the acknowledged optimum of 60/40 to almost the complete reverse. The analysis goes on to demonstrate that businesses that have taken the long view and invested in their brands, from a marketing perspective, have ultimately enjoyed superior growth.

So although the report gives positive indication that marketing budgets are set to rise, we would caution that the anticipated deployment of these budgets could perpetuate the problem rather than help to solve it.

The sharp turn to digital comes as no surprise in an uncertain time as marketers seek to take positive action and focus on more immediate and measurable outcomes. However, it’s crucial that marketers regard brand as an integral part of all of their marketing activity and the channel for delivery as the right one for the message and audience. Digital does not solely equate to tactical or sales activation.

What’s more, with every quarter comes further advances in technology and those investing in intelligence and automation will see the greatest opportunities to refocus their cost base. While AI is still in its early stages, and many marketers may still be unsure of where to invest, those that do will find that they very quickly have significant choice about how to deploy their resources in future, giving them a platform to work from that will put them far ahead of those that don’t.

Internet advertising budgets are at their highest in a decade, but the upcoming implementation of GDPR means that marketing departments will have to be savvy about their approach to digital. The current use of data led online advertising will face a huge bump in the road if organisations are not fully engaged in the implications and opportunities of GDPR, and do not have a robust digital strategy to fall back on.

Seeing GDPR as a compliance issue is missing the point – it will actively affect what you can do and who you can do it with, so marketers need to get closer to the detail and start planning now for the world post-May 2018. Well placed organisations are already tightening up on data practices, and getting back to what digital marketing should always have been – a value exchange where in return for data, customers get an enhanced experience. If your digital advertising cannot demonstrate the value of that data to the customer, you will quickly find yourself operating without it.