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While serious economic headwinds remain, the latest IPA Bellwether report is more optimistic than expected. The sunsetting of third-party cookies, data, generative AI and sustainability are the clear issues facing marketers, with pressure now on publishers to respond accordingly. Of note: Budgets for online and print publisher advertising decreased in Q1 this year.
In the first quarter of 2023, UK companies showed a greater appetite for marketing activities to support their brands, despite an ongoing cost-of-living crisis. The tone struck by the industry is a cautiously optimistic one, and whilst firms remain concerned about the industry-wide picture, budget plans show positivity – sales promotions is the top performer, as firms prioritise ways to help out customers.
Industry upheaval and technological changes remain front-of-mind for advertisers. The depreciation of third-party cookies puts data at the top of the agenda, while a wrestle between media formats to provide the highest value has sparked conversations about the future of video and published brands.
The future of the publishing industry, under pressure from the potential impact of generative AI and the need for a greater commitment to sustainability, is also a strong presence in the Q1 report, raising questions about what should be done next.
At a glance findings:
- Total companies reporting an upward revision to current budgets rose from the previous quarter to +8%.
- Main media marketing recorded its strongest expansion in a year at a net balance of +6%, despite drags from published brands (-1.9%, from -3.9%) and out-of-home (-12.4%, from -8.8%).
- +5.8% of firms raised their main media advertising budgets over the first three months of 2023, a stronger upturn than the previous period.
- Video budgets saw a strong upturn of net +8%.
- +7% of firms that were optimistic towards their business outlook (compared to a net balance of -17% previously).
- Whilst still negative, industry outlook is at its least pessimistic for a year, at a net balance of -7%, compared with a reading of -33.2% previously.
Industry Reaction
Sivan Tafla, CEO Total Media Solutions
“While firms feel positive about their own prospects, they continue to be cautious at an industry-wide level. While overall marketing spend is predicted to expand in the year ahead, budgets for online and print publisher advertising decreased in Q1 this year, representing a downgrade for the fourth consecutive quarter.
“As technological advances present new marketing opportunities, publishers competing for limited ad spend must continue to present demonstrable value to brands advertising online. As conversations around the potential dangers of generative AI grow more heated and third-party cookies become a thing of the past, publishers must prioritise quality and reliability to remain attractive to advertisers.”
Ben Putley, CEO and Co Founder at Alkimi
“Though we’re not yet out of the woods, the tentative optimism we’re seeing this year is a relief compared to the gloom of 2022. The narrowly missed recession and alleviating pressure on consumers have certainly been a major driver of positivity, but it’s also hard to ignore the ground-breaking tech that is revolutionising the industry. Whether using generative AI to power creativity, or decentralised ad exchanges to build radical transparency into operations, the tool kit available to marketers is expanding all the time. Those who grasp these opportunities with both hands will find themselves ahead of the pack as the economy strengthens.”
Alex Khan, EVP Global Partnerships, Amplified Intelligence
“While constantly rising digital media spend is now a quarterly expectation, the rate of flow is slowing. Part of this shift is due to inevitable deflation: extreme spikes driven by pandemic-amplified online interaction were always unsustainable. But an equally important factor is unreliable measurement.
As diminishing cookie viability combines with continued reliance on limited time-in-view insights, marketers are struggling to accurately evidence their impact and make the case for budget increases. To optimise and enhance advertising investments, gaining a precise view of the true human attention campaigns yield across online environments and how that affects short term outcomes and long term objectives will be critical.”
Pierce Cook-Anderson, Managing Director, UK and Northern Europe – Equativ
“Given the continued inflationary pressures affecting marketer and consumer budgets alike, it’s no surprise growth in ad spend has slowed. But slowing growth is not the same as no growth, and there are still hotspots of activity for marketers to take advantage of. CTV and retail media opportunities, in particular, are providing new avenues to access consumers and though their somewhat nascent nature may require more effort to get to grips with than long established channels. Both provide savvy marketers with an opportunity to secure a first-mover advantage at a time when competitors might prefer to play it safe.”
Harriet Durnford-Smith, CMO at Adverity
“Even as budgets keep rising, most CMOs are facing searching questions about return ratios on every outgoing — including not just ad spend, but also ever-climbing technology investment. CMOs will be scrutinised more heavily now than ever, meaning they’ll need crystal-clear results to justify spend. Those able to give CFOs and CEOs the most detailed, and accurate, breakdowns will have the best chance of both proving their value and unlocking greater resources by using granular insights to their advantage. Also as tempting as it might be to stick with what feels like safe bets for steady results, there is a high risk that favoured approaches and channels are eventually going to plateau.”
Paul Thompson, Country Manager, Seedtag
“Despite the growth of sales promotions during the last quarter, according to the report, it’s no surprise to see marketers continuing to invest on the essentials of brand building. Driving loyalty and maintaining a presence is vital to retaining and taking market share, but these promotions provide essential cut through and reward consumers with lower prices.
As economic and political instability recedes further into the rearview mirror, advertisers who are bold and hold their nerve will find themselves coming out ahead of the competition in the near future.“
Matt White, VP EMEA at Quantcast
“We’ve seen a degree of normalisation in consumer patterns of behaviour and a realignment of growth as people are returning to brick-and-mortar establishments and hospitality continues to rally. Hybrid living has had a clear impact on consumer habits too, with the CTV market continuing to grow in the UK, while linear TV declines, all alongside a continuous boom for audio and digital as a whole.
Looking ahead to the rest of 2023 should give marketers reason to be hopeful for continued growth. Next month will see brands investing heavily in marketing around the King’s coronation, and there will undoubtedly be a spike in activity for the Rugby World Cup towards the end of 2023 as well. Despite the current landscape, there’s plenty of reason for marketing teams to remain positive.”
Maor Sadra, CEO and Founder at INCRMNTAL,
“Despite the downbeat economy meaning 8 in 10 (79%) of marketers are working with static or reduced budgets, what the stats positively highlight is how marketers are getting more creative with their money. The industry is seeing greater experimentation as brands invest in new channels like audio and increase spending in areas such as sales promotions and direct marketing to help engage audiences during these difficult times.
It’s clear advertisers are doing what they can to ensure they remain relevant and appealing to consumers, but one issue many brands face is knowing how much value to attribute to each marketing tactic. Continuing to rely on legacy user-level tracking as a method of measurement, particularly in light of cookie depreciation, makes it impossible for many marketers to know how well their strategy is really performing. During these tough times, it’s more important than ever that brands invest in privacy-centric solutions that can measure the true incremental value of any activity impacting their marketing KPIs, online or offline. Only then can marketers ensure their budgets are truly delivering for the business.”
Data and the cookieless future
Evgeny Popov, EVP, GM International, Verve Group
“The continued shift to digital comes as no surprise in the current environment where being able to measure ROI is more important than ever. However, the upcoming loss of cookies and identifiers means the biggest growth opportunities will come to those who invest in privacy-centric solutions that can leverage non-personal data to enable accurate targeting and performance measurement. With more positive financial prospects ahead, smart marketers will allocate budgets to new technologies and marketing partners that can deliver on this. I expect we will see these allocations grow as brands and merchants plan ahead to later in 2024. These initial signs could bode well for stronger fourth-quarter/holiday campaigns to capture even more revenues than initially planned.”
Alison Harding, VP of Data Solutions, Lotame
“We’ve seen a good lift in data sales in Q1 2023 over last year and nearly on par with the highs of 2021, which tells us that marketers aren’t only spending more, they’re spending smarter. Cost pressures have disrupted brand consumer loyalties, so marketers must remain proactive in securing insights beyond their first-party data that can reveal which channels provide an opportunity to make an impression on price-conscious customers keen to jump ship. This might explain the surprise surge in investment on events, which offer a rare chance to get face time with customers and prospects, as well as the expected boost in sales promotions.”
The most successful formats in 2023
Csaba Szabo, Managing Director, Integral Ad Science (IAS)
“It’s no surprise to see video budgets once again increasing, despite the economic headwinds still buffeting consumers and brands alike. The increasing reach and scale of this format, thanks to the rapid growth of connected TV (CTV) and popularity of video-based social platforms, makes it a no-brainer for marketers as they look to reach UK consumers.
“In order to stand out from the pack in these video environments, marketers must ensure every penny of their ad budgets is being spent effectively. By harnessing the power of contextual targeting they can grab audience attention across social media platforms, CTV channels, and web sites. Embracing AI-driven multimedia classification tools on these platforms will be vital to ensure both effective campaigns and an enjoyable consumer experience away from any harmful content. Taking this a step further, marketers should also utilise attention metrics to enable a truer insight into the impact of ads on consumers.”
Emma Lacey, SVP EMEA, Zefr
“With video advertising budgets rising once again – up by +7.9% – this reinforces the value the format offers to brands looking to enhance their campaigns. While the cost of living crisis is ongoing, the persistent growth and expansion of video over the last quarter is encouraging to see and shows that marketers are seeing the value in investing in this engaging medium.
“It’s key that brands are maximising this video spend by ensuring suitable ad placements. More and more, we’re seeing agencies and brands looking for solutions to help balance cost and performance with the need for safe and suitable video inventory. The digital platforms are also developing tools to help navigate this, and are partnering with third-party verification solutions to provide greater trust and transparency for advertisers.
“With the increase of generative AI tools, and the challenge of deep fakes and misinformation, brand suitability will be under even more scrutiny moving forward.”
Nick Morgan, CEO, Vudoo
“Video content encompassing in-stream checkout experiences is the future. Reaching consumers at the moment of inspiration removes the journey entirely negating the need for the customer having to visit a separate page. And with the right tools in place to plan and measure campaigns, publishers and brands that get it right will reap the rewards.”
Dan Pike, Chief Product Officer, Covatic
“The results from Q1 2023 show that long-term brand-building goals have not been forsaken despite tough conditions, and the investment in main media marketing alongside sales promotions bodes well for future resilience. One exciting development is the uptick in audio advertising, demonstrating renewed (and well-deserved) confidence in a medium known for its popularity with consumers – with podcasts hailed to be one of the biggest growth opportunities in 2023.
“Nevertheless, ongoing economic uncertainty and closer scrutiny of environmental efforts highlight the need to advance on both of these fronts. Companies can build trust with key audiences and strengthen their business credentials by integrating a sustainable and flexible approach to planning and strategy to meet market and consumer demands.”
Raphaelle Tripet, Managing Director, Demand International, TripleLift
“It’s no surprise to see investment in video increase as brands realise its ability to drive performance during times of uncertainty, while offering a quality, brand-safe channel to reach consumers. This growth can also be linked to advancements in video advertising technology; providing innovative ways to drive campaign performance through creative.
It’s positive to see that the report highlights sustainability as an opportunity for growth. For brands investing in video there are already ad packages that allow them to run campaigns across different formats – from native to streaming – as a way to ensure ad spend goes to support publisher sites that focus on sustainable products and initiatives.”
Sustainability
Vincent Villaret, CEO, IMPACT+
“The environmental impact of digital advertising has gone unaddressed for too long. The growth of marketing spend in the first quarter of 2023 continues the industry’s upward spending trend, with sales remaining the top priority for brands. However, there’s also an opportunity for advertisers to shift their focus towards sustainable practices, as we continue battling climate change.
“Sustainability is set to play a major role in the near future, a refreshing projection that aligns with the UK government’s increasingly tighter climate regulations. With ESG reporting high on every C-suite’s list of priorities, budgets are expected to move towards sustainable solutions and technologies that support the industry’s expected growth, without further deepening its environmental impact.”
Reduction of digital advertising impacts should become a guiding rule for any future investments, projects, and partnerships, as more industry players prioritise the environment over dysregulated growth at the planet’s expense.
Vincent Villaret, CEO, IMPACT+
Rob Sewell, CEO – SmartFrame Technologies
“It is encouraging to see sustainability gaining ground as an opportunity, although this doesn’t come without its challenges – especially at a time when economic pressure remains high. Tighter regulations around sustainability efforts require a change of mindset to meet climate targets. Fortunately, the challenges of becoming more green and continuing to put customers first are not mutually exclusive. Smart decisions about tools and sustainable suppliers can help meet demand and limit waste while also opening up avenues for future growth.”
