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Advertising Association/WARC Expenditure Report – industry reaction

David Murphy

With the release earlier today of the Advertising Association/WARC Expenditure Report, forecasting a 16.7 per cent reduction in UK ad spen this year, we asked the industry for reaction to its contents…

Chris Hogg, managing director EMEA, Lotame:
“Advertisers that push ahead with ad spend in the next few months will be at a competitive advantage post-pandemic. Lower programmatic CPMs, less competition from brands who are not advertising and more consumers online presents an opportunity to gain market share growth now and be in a strong position for the upturn.”

“This is a good time to learn about and build a panoramic view of the customer, test creative messages and optimise data enrichment strategies. With more people at home and increased eyeballs on screens there is also the scope to advertise in new environments you wouldn't typically consider. News sites, for example, have seen a huge surge in readership, but also a reluctance from some brands to advertise, due to the COVID context – providing the messaging is right and socially conscious, opportunities are present.”

Andrew Morsy, managing director international, Peer39:
“It’s no surprise ad spend has been reined in due to uncertainty over COVID-19. Cutting back is a natural reaction as brands take time to understand new consumer behaviour and reassess what to have in market. In the mid-to-long term, and with relevant messaging determined, brands can step back into the picture so they are front of mind with consumers once something closer to normality resumes.

“More people at home with eyes on screens and the surge in online readership, particularly in premium publishing, means there are opportunities. While advertisers and brands have been initially reluctant to be placed next to COVID-19 content, those who avoid blanket keyword blocking – and instead use context and sentiment to determine ad placements – stand to capture a share of audience in trusted media environments other buyers may be avoiding.”

Paul Evans, strategy and marketing consultant:
"The fall in ad spend is not unexpected, of course. We now all hope that the way marketing as a leadership function – and advertising as a tangible, public expression of that leadership – will drive a positive bounce back to growth for businesses and the wider economy. There have been clear signs – at both sector level, e.g. grocery, drinks, e-commerce, and with particular brands, e.g. Tesco, P&G, Unilever, Guinness and Colgate, to name just a few – of businesses who have shown a conviction in the role that marketing and advertising can play during this challenging time for the general public. These will be the marketing businesses that will be stronger as a result of this commitment."

David Fletcher, chief data officer, Wavemaker:
“While the short-term outlook is extremely challenging, we share the longer-term optimism that the market will return to growth. A lot of the current commentary is based on the old playbooks about brands continuing to invest through recession. However, the current situation is far more complex than just an economic downturn. Decisions brands take now will determine how well placed they are to get back on the path to growth.

"At Wavemaker, we talk a lot about brands being not just present but present with purpose. Even in unprecedented circumstances, there are brands that have strengthened their relationship with existing and potential customers. It’s not simply that they have invested, it’s that they have put their investment in the right place, while demonstrating humanity and generosity, that has resonated with the public."

Sam Taverner, EVP, Merkle EMEA
“Inevitably the short-term picture is extremely challenging. The forecasts point to a significant negative adjustment in ad spend in Q2, with hospitality and travel spend halted completely. However, some of that difference will be made up by increased government spending and continued strength in online retail, media and telecommunications.

“Nevertheless there is a growing consensus that we will start to see a return to some form of normality later this year. Even when restrictions start to ease, the outlook is complex and constantly evolving as we adjust to the ‘new normal’. Businesses would be well advised to divert their budget to data science and planning, in preparation for optimising the expected ramp-up in spend in Q3. In fact, many are already using this period of enforced pause to their advantage, using deep analytics to re-evaluate large swathes of their strategy and to develop more robust ad and martech foundations.

Agility will be crucial as businesses look to bounce back. The use of data to properly inform new strategies and business plans and to drive a host of decisions across businesses at pace will be critical, not just to short-term survival, but to long-term growth.

Florian Gramshammer, MD EMEA, Impact:
"This report does sadly highlight an expected decline in ad spend but heralds the good news that we can expect to experience a return to growth in 2021. Before we get to that point, we have to accept that channels such as online display are predicted to fall by 12.7 per cent this year. It is therefore time for every company in the ad tech and martech industry to focus on making sure they are developing a clear strategy for reaching their target audiences outside of display advertising. Most are looking at the value of their partnerships and working collaboratively to sustain their partnerships and deliver much needed return on investment. At Impact, we are seeing substantial growth in some areas and we are focused on enabling new partnerships that channel spend into relationships with a more certain ROI.”

Jenny Stanley, MD, Appetite Creative:
“The latest report from AA/ WARC is certainly sobering, and will come as no surprise to the industry. Increasingly, we are seeing brands turn to innovative formats in areas such as video that maximise the impact of their content and creativity. Brands now more than ever need quality, safe, original creative content in verticals which are thriving during lockdown, such as health, beauty, FMCG and homeware.

“The digital advertising business has much to do before we come out the other side, and to some extent, a global pandemic has put some things in perspective. But if we can learn lessons in these trying times, we will be stronger for it in the end and need to look forward to the expected significant growth towards the end of the year.”

Niklas Bakos, CEO, Adverty:
“Channels such as OOH and cinema are expected to see large decreases in ad spend in 2020, with growth projections at -18.7 per cent and -33.6 per cent respectively. However, although budgets for OOH might have decreased overall, we are seeing brands and agencies divert budgets into channels such as in-app and gaming which are performing well and are complementary to their messaging and formats. Before we return to strong growth in 2021, we can continue to show value in order to drive marketing ad spend back up during lockdown.”

Richard Wright, head of marketing, Scoro:
“The £4.23bn reduction in the revised 2020 forecast for ad spend will be setting off alarm bells at media agencies across the country. Widespread budget-shaving measures to brace business for the storm are already being widely reported, and while expectations for 2021 growth are positive, many are concerned about what the near future has in store.

“To weather this difficult time, efficiency will be key for agencies. Remote-working throws up new challenges for teams, but it also presents a good opportunity to re-evaluate what best practice should be. Time is money and now is the time to invest in, and innovate with, tools and techniques for effective collaboration to give agencies that much-needed boost in 2020, and a springboard into a more productive 2021.”

Rachel Powney, VP of marketing, Dugout:
“The ad spend forecasts for 2020 reflect how companies are rethinking marketing strategies in response to changing consumer behaviour. Despite blanket keyword blocking weighing on forecasts as brands seek safe haven from COVID-19 related content, the report highlights a leap in online traffic of between 30 per cent and 60 per cent for premium publisher sites, with consumers locked down and hungry for news, entertainment and sports – which does present advertisers with an opportunity.

“We have already seen some industries like food, financial services and DIY suppliers adapt their strategies to focus on mission-based and cause-based marketing, to tap into consumer needs according to their situation. With a touch of creativity and a focus on contextual relevance, bolder brands have an opportunity to corner the market and make the best of a challenging 2020.”

Ali MacCallum, CEO, Kinetic UK:

“Even in the toughest period that any of us can remember, out of home has continued to demonstrate its power to get influential communications out to audiences immediately and publicly.

“In recent months, OOH has played a key role in delivering vital public information right across the country. While none of us anticipated the day that OOH would be used as a medium to urge people to stay indoors, we’ve still seen some brave and brilliant campaigns from the likes of Tesco and Paddy Power, as well as some fantastic initiatives supporting our key workers – often amplified at scale via social media. It is this dynamic creativity that will be positively remembered as we start to return to some form of normality.

“There is growing optimism that the market will start to pick up in the coming weeks and months. As restrictions are gradually lifted, OOH will have a crucial role to play in the UK’s social and economic recovery. The smart deployment of dynamic digital OOH will become highly effective for brands looking to reach audiences across location and context to communicate that they are open for business, and to capitalise on the demand that has built up.”

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