Ad Spend Forecasts Muted as Economic Cloud Looms Large Over Brands

Despite solid growth in the first half of 2022, global ad spend forecasts for the remainder of 2022 and 2023 are being downgraded as marketers take a "glass half full" approach to budget planning. Following record levels of advertising spend in 2021, as 2022 reared its head all signs pointed to businesses continuing to step up their post-pandemic recovery plans. However, many marketers have been quietly readying for the next challenge of a recession, with the topic coming up on several of the largest stages over the course of Cannes Lions Festival. These datasets offer the first glimpse at how an economic downturn might pull at the pursestrings of CMOs. A pessimistic outlook Earlier this year, Dentsu pitted global ad spend would grow by 9.2% annually to reach a record $745 billion in 2022. Now, it's downgraded this prediction to a more modest 8.4%, predicting it will reach $738.5bn. This brings Dentsu's estimates more in line with Zenith and GroupM's forecasts, which took into account the economic climate as well as the geopolitical impact of the Russia's war on Ukraine. GroupM Forecasts Ad Spend Growth, Though Less Than Last Year’s, Despite Economic Conditions In the U.K., the IPA's quarterly Bellwether report (which surveys 300 U.K. marketing professionals from the U.K.’s top 1,000 firms) showed budgets enjoyed solid growth in the second quarter of the year. Around 10.8% increased budgets, compared to 14.1% in the previous quarter. Despite this, CMOs were cynical about the industry's financial prospects in the second quarter, with 26.7% of brand leaders saying they were more downbeat about the overall economic outlook for the ad sector than three months prior. This was the most negative result recorded since the height of the pandemic in 2020. For first time since Q3 2020 too, marketers' own-company financial prospects slipped into negative territory. Underlying data showed 30.7% were pessimistic about their company's budgets, compared to the 21.2% that were more optimistic. Since the last Report, IPA Bellwether author, S&P Global Market Intelligence, has downgraded its assessment for U.K. economic growth prospects in 2023 through to 2025. In line with this ad spend forecasts have been written down for the same time period, but crucially they've also been cut for the rest of 2022 , dropping from 3.5% to 1.5%; highlighting the economic headwinds that have built up through the year which could chip away at consumer spending. What People Really Want From Brands Amid a Cost of Living Crisis Joe Hayes, senior economist at S&P Global Market Intelligence and author of the Bellwether, said marketers were now taking a more cautious approach when it came to budget planning. "Risks are clearly skewed to the downside as the intensifying cost of living crisis weighs on disposable incomes, while firms face difficult decisions regarding their spending at a time when their cost burdens continue to inflate," he said. Marketing out of a recession Paul Bainsfair, the IPA's director general, said the findings uncovered marketers' concerns about the challenging business climate ahead. He pointed out that a number of respondents had signaled their intent to "market aggressively" to support long-term growth and gain market share from less-prepared competitors. "This is usually a wise and canny move," he said, pointing to IPA findings that brands which increased ad spend in the 2009 financial crash by 8% upped their market share by an average of over four times more during the recovery phase. “Meanwhile, others were also planning for the challenges ahead by positioning their businesses to support customers through difficult times," Bainsfair added. "Brands need to be seen and continue to work for the benefit of consumers. They are important because they offer choice which ensures competition and lower prices, which in the months ahead will be important for consumers looking to spend their money wisely.” Allan Blair, head of strategy at VaynerMedia London, said this chimed with what he'd be hearing from clients. "As we emerge from Covid, and freewheel towards the worst recession in generations, shoppers are becoming more discerning in the decisions they make when parting with their hard-earned and rapidly dwindling, cash," he said, noting brands would need to work harder to grab people, be sympathetic to their needs and stay relevant in their lives. You Can’t Pause Your Brand. Is It Ready for an Economic Downturn?