Majority of Advertisers Likely to Retain Media Spend Levels During Expected Economic Recession

Following a period of record ad spend, nearly a third of media budgets are set to decline next year with talk of recessionary market conditions likely to affect spend on traditional media such as TV, radio, print and out of home especially, resulting in a move to short termism by marketers. According to a study conducted by the World Federation of Advertisers (WFA) and media analyst firm Ebiquity, which drew responses from 43 multinationals, five of which are the world’s top advertisers by spend with a collective investment of $44 billion, 29% said they intended to decrease their media budgets. Meanwhile, four in 10 said they planned to maintain the same level of budget from this year, although three quarters admitted that their budgets were under scrutiny to justify investment. The forecast follows a downgrade in forecasts from the likes of the IPA, GroupM and Dentsu earlier this year following record levels of investment through out 2021 and the early stages of 2022. The findings are reflective of choppy economic waters, said Matt Green, director of global media services at the WFA. "[There is] uncertainty, which is prompting people to rethink," Green said, noting that there would be a greater proportion of advertisers planning to increase advertising spend in a healthier economic climate. "Usually there is a sense of just growth and momentum." Where changes in spend will be found Cuts in spend are more likely to happen in EMEA as apposed to the APAC region too, with a third of respondents agreeing that they could see a decrease of up to or more than 10%. In Asia Pacific however, 15% were said to be considering “a slight decrease” and 35% planned “a slight increase.” Breakdown by region These changes will likely see performance marketing grow in focus with 28% of respondents admitting that they will seek to boost performance with their spend next year, in comparison to 21% who intend to focus on increased brand spend. Digital channels will be the focus with 42% planning to either slightly or significantly increase spend with more flexibility on investment expected with a greater use of biddable auction-based platforms for digital media. Only 9% of respondents said they planned to increase the proportion of their budgets with up front commitments as they intend to hold back funds due to variable economic conditions. Media Channel Expectations Traditional channels face the brunt of cuts Budget cuts look most set to impact traditional media channels as half of respondents say they plan to cut their offline investment, while a quarter admitted they intend to make cuts of 10% or more around print. Breakdown per channel “As brands are required to achieve more with less in 2023 to optimise the value of their investments, it makes sense to review expenditure and cut ineffective and wasteful spend first,” said Nick Waters, chief executive of Ebiquity. While digital advertising budgets are poised to be more stable than offline, not all channels are created equal. More than half of respondents plan to increase their investments in paid social, retail media, and connected TV. For channels like digital audio and digital display, only around a third plan to increase budgets, while around a fifth plan on decreasing their spend. The softness in digital display is not surprising given that there has been stagnation for banner ads in recent years, said Vincent Létang, evp global market intelligence at Magna, IPG's media investment and intelligence company. Létang expected digital audio to be more resilient, given the growth of the sector; for example, podcasts are expected to grow to $2.2 billion in ad spend in 2023, a 27% increase from 2022, according to an Insider Intelligence report. The salience of digital writ large compared to linear channels can be reflective of a preference for shorter-term commitments, said Ruben Schreurs, chief product officer at Ebiquity. GroupM Forecasts Ad Spend Growth, Though Less Than Last Year's, Despite Economic Conditions "Traditional/linear channels are more often traded with upfront commitments and guarantees," he said. "Digital channels typically allow for much more tactical flexibility during the year, so brand advertisers prefer these channels during uncertain times." While flexibility can be helpful, the tendency for brands to be laser-focused on the lower-funnel can have risks, Waters said. “Sustaining investment is one thing, but there is a risk to long-term brand health by over-investing at the bottom of the purchase funnel. It is a natural instinct to want to see immediate results from media investment but the longer-term trade off needs to be weighed carefully. It becomes more expensive to re-build brand credentials once they have slipped,” Waters said.