AA/WARC Q2 2020 Expenditure Report – the industry reacts

Following the release of the latest UK ad spend figures from the Advertising Association and WARC, the industry shares its thoughts on the news that Q2 2020 was the worst ever quarter recorded for the UK’s advertising industry

Ali MacCallum, CEO UK, Kinetic Worldwide

“The short-term outlook is extremely challenging, but we share the longer-term optimism that the market will return to growth, even if the full recovery takes up until 2022. The recovery and growth of OOH as a channel is testament to how OOH will continue to engage and inform mass audiences, as we navigate through COVID-19. 

“There are OOH campaigns that have strengthened the relationship with existing and potential customers during and post-lockdown, as they celebrated humanity (championing key workers) and connected with the public through humour and relevance. Moreover, with the evolution of automated trading and dynamic creatives, advertisers can optimise their campaigns almost instantly and react to the constantly changing environment. This agility and flexibility will be crucial aspects of our journey through this year’s festive period up until our industry’s full recovery.”

Shazia Ginai, CEO UK, NeuroInsight
“This latest AA/WARC report makes for sobering reading, but it’s unlikely to come as a massive shock to anyone in marketing. The unprecedented conditions we’re all facing this year have led to many brands simply cutting off the flow of marketing budgets immediately, and this has had an undeniable impact on the industry as a whole. Unfortunately, our research has shown that this also has an impact on the brains of consumers and ultimately their purchase intent. By stopping the flow of marketing communication, brands are stopping the building of brand associations in the subconscious. 

“Marketers risk weakening some of the positive connections which they have spent years nurturing in their customers’ minds. Halting marketing proceedings also means that brands may be slower to adapt to the shifts we are seeing in consumer behaviour, particularly when it comes to how they are seeking more emotional connections with brands. As we head into the festive season – arguably one of the most emotional times of the year for people – many brands may need to reassess their current courses of action, or risk eroding those positive bonds in which they have invested so much. At a time when customers are seeking reassurance from the world around them, the potential rewards to be reaped could be massive.”

Azlan Raj, Chief Marketing Officer EMEA, Merkle
“Following last weeks IPA Bellwether report, these latest AA/WARC forecasts offer further insight into the significant, but expected, impact of large parts of the advertising ecosystem effectively shutting down for much of this year. Having navigated thus far through such a stormy 2020, there are still choppy waters ahead for marketers – with ongoing localised lockdowns and Brexit fallout still to come.

“Yet theres room for cautious optimism, especially for those agencies using this period of turbulence as a time for reflection and re-evaluation. Those that can change in line with consumers behaviour – as they shift online, become less brand loyal, but reward brands that are useful to them – stand to gain the most. Especially agencies and brands that take a more complete approach to the evolving experience of customers.

“Search – as a channel driven by purpose – is proving highly resilient as a channel, in contrast with OOH and Cinema advertising, which were effectively switched off in Q2. However, the main challenge for marketers into 2021 is arguably channel-agnostic, and its the wider shift to digital, data and customer experience. This is going to require a concerted industry effort to create a more unified customer view through data, strengthened by greater investment in truly consistent cross-channel experiences for customers. The last thing consumers will tolerate in such stormy waters are brands that leave them all at sea.”

Owen Hancock, Marketing Director, Impact EMEA
“The pandemic has had a hugely detrimental impact on the digital advertising industry and it’s certainly no surprise that a 14.5 per cent decline in ad spend was highlighted in the report. Whilst the ad market is unlikely to fully recoup this year’s losses until 2022, there still appears to be a glimmer of hope that we can safely predict a return to growth in 2021. This silver lining should encourage brands to explore or continue investment in lucrative advertising channels like partnership marketing. Now more than ever, brand to brand partnerships have become more important as collaboration across industries will help to identify new revenue opportunities in an uncertain economy.”

Simon Kvist Gaulshøj, CEO, Adnami
“Whilst the report highlights a decline in ad spend, there are still opportunities for brands to explore alternative advertising channels in response to changing consumer behaviours in the pandemic.

“As the population was encouraged to remain at home, more traditional channels like cinema and outdoor saw a steeper decline in ad spend compared to online and digital formats. This could pave the way for digital advertising, as consumers are spending an increasingly large amount of their time during lockdown. The digital high impact category is particularly interesting, as those attention-grabbing formats deliver greater effectiveness compared to standard display. This presents a real opportunity to review media plans and increase investment in more creative digital campaigns that captivates consumers and makes an impact on consumers and brands bottom line.”

Tommy Torjesen, CMO and Co-founder, Cavai
“The current climate has really driven home the growing importance of creating a dialogue with customers who are increasingly expecting more from brands. With the majority of consumers regularly preferring to communicate on platforms, brands should use this as an opportunity to build stronger relationships with consumers. At a crucial time when consumers are spending more time on their devices, brands should invest in channels like conversational advertising. Indeed, while the report indicates that investment fell across all advertising formats in Q2, online and digital formats performed less badly than others. A more positive outlook is predicted for 2021, as the digital advertising industry expects a more robust return to growth. Now is the time for brands to continue investing in advertising to remain competitive and look at creative ways of reaching consumers as their habits shift.”

Simon Barnes, Group Commercial Director, tmwi
“Despite UK ad spend forecasted for slower recovery, there are greenshoots of optimism with a prediction that the advertising industry will return to growth in 2021. This should encourage brands to maintain advertising investment particularly in digital and online formats, that have fared slightly better compared to more traditional outdoor and cinema formats. Nonetheless, the report suggests that cinema ad spend is forecast to rise by 138.3 per cent in 2021, so a more integrated approach with digital could provide brands with additional advertising touch-points to reach consumers.”

Niklas Bakos, CEO, Adverty
“Whilst the report suggests advertising spend is in decline, gaming has been a huge growth area with in-game advertising bucking the trend. These findings reveal that more traditional channels such as OOH and cinema will experience decreases in advertising spend and this should encourage brands to shift their budgets elsewhere to ensure a healthy return on investment. With gaming exploding in popularity during the pandemic, brands should uncover more innovative ways to reach an audience of almost 3bn who are actively playing games online. As the report predicts a positive return to growth in 2021, brands can be more optimistic about the potential of alternative advertising channels like in-game advertising as a lucrative revenue stream to accompany other online ad formats.”

Matthew Goldhill, CEO, Picnic
“We largely expected the report’s findings that the digital advertising industry wouldn’t recover until 2022 as a result of the pandemic. Despite this, we are encouraged to see a potential return to growth in the New Year which should provide some exciting opportunities for advertisers. It is reassuring to see media channels like out of home predicted to perform well year-on-year and this is underpinned by strong growth in their online formats. To build on the growth of digital media, brands must continue investment in more creative formats like video and mobile to engage consumers. These premium ad formats can help create more meaningful experiences for consumers who are now spending more time on their devices than ever before. Advertisers should take risks with their media and look at developing more innovative campaigns to take advantage of 2021’s predicted return to growth.”

Philippa Snare, SVP EMEA, The Trade Desk
“Despite today’s report revealing that ad spend is down by 14.5 per cent this year, it is extremely encouraging to see that channels across the board are predicted to perform well in 2021 as the industry recovers after a turbulent year. 

“It is unsurprising that digital looks set to steam ahead in the new year. With ongoing uncertainty, the live data insights provided by digital advertising will be invaluable to marketers. Programmatic gives marketers the control to pivot their messaging at a click of a button, which is absolutely essential when areas of the UK continue to face differing restrictions. For example, Digital-out-of-home (DOOH), forecasted to improve year-on-year by +60 per cent, allows marketers to create broad scale brand awareness, while ensuring they can turn off or tweak messaging according to the local context.

“Looking to the future, those who embrace digital advertising are most likely to bounce-back in the coming months – so now is a crucial time for marketers to be nimble, adaptable and ready for when the industry returns to pre-pandemic health.”

Mark Inskip, CEO UK & Ireland, Media Division, Kantar
“These figures paint a stark picture of the difficulties the advertising economy has come up against this year. As pandemic restrictions continue, it’s sensible for the industry to be realistic about how long recovery will take, but savvy business leaders won’t lose sight of the value of advertising through such uncertain times. Smart investment in channels where consumers are spending more time will win brands greater consumer engagement and share of voice – which may well prove key to weathering this storm. 

“While budgets remain tight and the economy is still getting to its feet, businesses can find much needed certainty by measuring each step of their marketing campaigns to make smart, informed decisions. Especially as different areas of the UK experience different lockdown measures, it’s never been more crucial for brands to understand consumer mindsets in order to deliver appropriate and engaging content. Those who do will stand to benefit enormously when the ad market rapidly rebounds in 2021 and returns to the spending levels we enjoyed pre-pandemic in 2022.”

Patrick Johnson, Global CEO, Hybrid Theory
“There is no doubt that marketers are facing new challenges in this evolving market situation. As we navigate through this new world, financial pressures continue to mount on marketing budgets and teams, leaving a huge task for brands and marketers to adapt effectively and work differently.

“I have learned from the ancient Chinese wisdom, the word for ‘Crisis’ (???in Chinese consists of two elements which are ‘danger and opportunity’. This is a perfect description of our new norm. We have seen tons of businesses that are suffering due to the pandemic, but at the same time, we have seen digital transformation escalated like we have never seen before. The next two years will be key, brands who evolve with the opportunity will grow and come out stronger while there will be businesses at the danger of cease to exist.  Especially now, as we’re moving into a key time of year for all businesses; as the holidays approach, marketeers will have to reimagine their traditional tactics across the festive period and find smart ways to engage audiences.

“Whilst this may be a challenging year according to the report, it is essential for the industry to come together and help each other to stabilize and grow. New audiences, new behaviours and new trends will emerge over the months and years, and savvy marketers will have to constantly learn and adapt their strategies through this ever-changing climate.”

Paul Frampton, President International, CvE
“The current situation remains uncertain, and marketers may feel pessimistic after a report such as this lands. However, there are hidden positives that should give reason for confidence. The financial markets and consumer spending have bounced back quicker than expected but with a different shape as a result of the growth in e-commerce and DTC. 

“The same is true of media investment. Some channels have been hit hard but the clear narrative is one of resilience and resurgence in digital. COVID-19 has either been an accelerant or catalyst for marketing transformation. Years of consumer change occurred within weeks and brands that continue to invest and are changing fastest are winning. 

“In our business we see appetite from brands for doing things differently. Marketers are looking for incrementality and questioning what has done before. We predict more investment shifting towards addressability and the digital streams of traditional channels e.g. connected TV and DOOH. 

“Targeting and measurement is now catching up. As both high impact and reach can be achieved with reduced wastage and greater precision, we will slowly witness an entire industry shifting its spend profile, as we have seen with digital per se over the last decade.  Let’s not get too downhearted by the signs but rather acknowledge an industry growing up and evolving.”

Sanjay Nazerali, Global Managing Director & Chief Strategist, dentsu X
“Advertising spend has almost always followed the general economy, so it’s unsurprising that the AA and WARC report finds that there will be less Christmas cheer this year..  What’s more interesting is that in between the cracks of traditional media, there is extraordinary growth in social and online platforms as people were confined to their homes during much of Q2. TikTok usage doubled in 2020; Amazon’s stock is up 60 per cent YoY; after years of sluggish maturity, Facebook’s monthly average users has jumped 12 per cent; Zoom daily meeting participants grew from a modest 10m in December 2019 to a mouthwatering 300m by April 2020. That’s like growing from the size of Portugal to the USA in four months flat.

“There really is a New Different in HSBC’s words, where marketing spend will be funneled into new areas, strategies updated and creative reinvented. In marked contrast to the AA and WARC’s report, advertising spend on social media grew by 43 per cent YoY in the UK in Q3. We have talked for too long about shifting media investment from simple exposure to engaged experience. Now there’s no alternative.”

Amy Jackson, Business Director, Incubeta
“Given the circumstances retailers are currently in, its no surprise that ad spend is down Year-on-Year. With looming rents, overheads, suppliers and staff to pay, as well as making up for losses in Q2, retailers are in a catch 22 situation; marketing and advertising are currently taking a huge hit, but without them a business wont grow. 

“Throughout the past six months we’ve seen large fluctuations in ad spend. Whilst some businesses have been unable to keep up with demand from at-home consumers and have turned off their marketing, other businesses have switched from areas such as OOH and direct mail in favour of digital marketing in order to drive awareness and sales in a competitive space.”

“Im optimistic that 2021 will recover to a large extent, however we may have to wait until 2022 before we see a full recovery. Although ad spend is forecast as down in Q4, consumers are still exploring and spending. This time last year, a key topic of conversation was the possible impact of Brexit on Black Friday spend and revenue, yet it turned out to be one of the most successful Black Fridays in years. We have a long way to go, but out of the darkness there is light shining on brands and businesses who are working hard to adapt.”

Anthony Botibol, VP Marketing, BlueVenn
“While ad spend is forecast for a slower recovery than expected, its important marketers understand that if the right steps are taken, stable recovery and even growth may still be achievable in 2021. As furlough schemes come to an end and budgets for the new year are considered, organisations have the difficult task of balancing their books between ad spend costs and other resource requirements.  

“For this reason, businesses need to be more thoughtful and look inside their existing customer base to see which loyal groups they can engage and serve better. Part of this will mean collecting and collating data across multiple owned channels. Our latest Maturity Index Report found that the number of companies that are unifying their data in a sophisticated way has grown by 16 per cent in the last year; and those businesses that do unify data are, in fact, more than twice as likely to achieve their business goals and see a return on their investment compared to peers that do not. The reason for this, particularly for high-street brands, is that they can start to identify how each customer moves from offline to online and back again, and target them accordingly with the most relevant offers. Without this ability, many brands are flying blind. An organisation’s customer base and the data it holds is unique, so finding new ways to up-sell and cross-sell amongst existing customers will be crucial in helping marketers to mitigate the lost revenue from a reduced pool of new customers.”

Craig Tuck, Chief Revenue Officer, The Ozone Project
“The latest AA WARC Expenditure Report paints a somewhat expected picture of an industry – like most others – that has had a very challenging year. However, while the pandemic might have made a significant dent in ad spend, its timing has forced the acceleration of changes that advertisers were demanding.

“This is particularly the case in digital where we’ve seen major challenges like programmatic supply chain transparency and how to navigate a cookieless future come even more to the fore. The result is advertisers taking a more considered and conscious approach to their media placements, to ensure they deliver the right outcomes in the right types of environments.

“While on the surface, the outlook may seem bleak and a full recovery a distant dream, we believe if we focus on solutions that truly put advertisers’ needs first, then we have every reason to be optimistic as we head into 2021.”

Nat Poulter, Chief Operating Officer, Jungle Creations
“That digital formats of advertising fell ‘relatively less badly’ than traditional formats is hardly cause for celebration, but it does make clear just how far the balance has tipped in their favour, and the importance the sector holds relative to traditional formats, which will continue to suffer beyond next year.

“Consider on one hand that digital formats of advertising recorded their first ever fall in investment, and the other, that they were the only formats to show a year-on-year percentage increase. Digital has propped up the whole ad market this year.

“There’s a direction of travel in the sector that even the most skeptical can no longer deny. Far from the bursting bubble many have predicted of the sector for years, digital is the only format to have shown anything approaching resilience throughout this pandemic.

“This is a continuation of a trajectory we have seen over many years accelerated by circumstance. We’re five years ahead of where we thought we’d be, and from what we’ve seen internally since the dates this report covers, this will not revert. If brands are seeing the results they have sought through social, why would they change tact?

“The job of a good marketer is to reach consumers where they are, which for the period covered by this report was mostly locked indoors on social media, seeking entertainment, and sharing their experiences of the chaos outside.

“The ways in which a brand can utilise social media have changed so much in the last couple of years, as a brands social channels have replaced the website as the starting point for the customer journey. There’s been a real shift away from social ads to brand partnerships and original content. The digital market is maturing; the pandemic has been its coming of age.

“I wouldn’t ring the death knell for traditional advertising just yet. Every year someone predicts its demise and every year they are wrong. Even in these extraordinary circumstances, social media is not the only effective way of reaching consumers. The difference now is that social media is where a successful campaign begins, rather than an afterthought.”

Vihan Sharma, Managing Director Europe, LiveRamp
“It’s inevitable that 2021 will be another challenging year for the industry, but with these challenges comes a major opportunity for advertisers and publishers to innovate their strategies and make sure they drive the best returns in these difficult times.

“It goes without saying that any spend needs to be accountable. The key to this is identity and ensuring that messages are delivered to the most engaged audiences at the optimum time, and in the most privacy-centric way. Trust is imperative – consumers won’t share personal data without it, and distrust in the industry is the reason third-party cookies are rightly being phased out.

“The best approach to targeting consumers at scale in a respectful and engaging way is by implementing a first-party authentication strategy based on a trusted value exchange. Then, when brands activate on people-based identifiers that are connected to these authentications, they are also able to calculate and quantify return on ad spend through incremental campaign testing and analysis, which will allow them to consistently optimise.

“Placing consumers at the centre of digital strategies is crucial to building solid relationships that will redefine the value exchange in a privacy-first world. This is the first step to ensuring every pound spent is accountable, addressable and measurable, which is increasingly critical in the current landscape. Further, by employing a test, learn, optimise and repeat process, brands and publishers will be able to better sustain opportunities for ROAS and monetisation in spite of prevailing headwinds industry-wide.”