UK advertisers are planning to cut-back on offline media in favour of digital spend, as the recession puts increased pressure on budgets. This is according to research from ISBA and Ebiquity, who surveyed 59 brand advertisers (which included three of the UK’s top 10 by spend and 11 of the UK’s top 50).
Sixty nine percent of respondents agreed that 2023 budgets are under heavy scrutiny, resulting in nearly 40% of respondents planning to cut offline investments next year, such as TV, print, and out-of-home. In contrast to this, only 20% were planning to cut digital budgets. Fully 33%, on the contrary, are planning to increase spend in digital channels such as paid search, social, and connected TV, but only 20% said offline budgets would.
I spoke to a few people in attribution and media optimisation about what’s happening in advertising right now, and how this might impact the over-arching goals of digital media spend.
“Streaming is now a critical piece of the puzzle”
The ISBA report finds 67% of advertisers planning to cut linear TV spend. John Nardone, President at Mediaocean, an omnchannel ad platform, suggests that the shifts are not as dramatic as the ISBA numbers might suggest. “While it’s true that traditional TV reach has declined in recent years,” he said, “it is falling from a very high base, and not at such a steep rate. As such, it’s still an extremely important media channel, especially as TV viewing converges with digital in streaming formats.”
Amid tough economic conditions, however, Andrew Carmody, CMO of ViewersLogic, provider of attribution and media planning services, suggests some marketers aren’t doing enough to prove the effectiveness of traditional channels.
“The first budgets being cut are in the channels that can’t prove they work. Linear TV is under scrutiny as it still relies on metrics like reach and frequency as proxies for proving effectiveness.” Consequently, said Carmody, marketers are making ‘knee jerk’ cuts – even without the data to back it up.
“For example, a brand came to us planning to cut their TV spend because they thought that their campaign didn’t work after sales stayed flat. Our detailed analysis showed them that in fact sales in the sector more broadly plummeted and that their sales were maintained only because of their TV campaign, proving that advertising in a recession was crucial to their survival.”
Research has shown the importance of keeping a varied media plan which is stronger when TV is combined with streaming – Emmanuel Josserand, FreeWheel
Despite still holding value for brands, it is certainly the case that marketers are decreasing spend in traditional TV advertising. Instead, many are looking to connected TV (CTV). Jo Kinsella, President of InnovidXP at Innovid, an independent advertising and analytics platform, explained to Econsultancy that CTV “gives advertisers greater flexibility and optionality during a time when they need to make sure every impression and dollar is accounted for.”
Paul Wright, General Manager Western Europe & MENAT for mobile measurement business AppsFlyer further highlights this growing area of interest.
“Almost all businesses (98%) [in our survey] believe CTV advertising will surpass mobile advertising and one-quarter believe it will do so within the next three years,” he explained. “CTV’s ability to engage new audiences will likely be a key reason for its growth, with advertisers seeking to acquire customers and mitigate potential losses during the recession.”
Similarly, Emmanuel Josserand, Sr Director, Agency, Brand & Industry Relations at video advertising platform FreeWheel, emphasises how the growing digitisation of TV is drawing in advertising spend.
“We’re seeing more [budget] directed towards advanced TV channels, including connected TV, over-the-top, addressable linear TV, and video-on-demand. Looking ahead, we expect ad-supported video-on-demand (AVOD) and free ad-supported streaming Television (FASTs) to experience especially strong growth, with almost nine in 10 UK marketers who participated in the latest AudienceXpress survey intending to invest more in these channels.”
Interestingly, however, Josserand also suggests that marketers should not put all their eggs in one basket, as “different channels answer different needs.”
“Research has shown the importance of keeping a varied media plan which is stronger when TV is combined with streaming – TV has long been a gold standard in advertising for good reason. Streaming is now a critical piece of the puzzle but should be complementary.”
Brands looking for fast-converting channels?
While ISBA states that digital growth is outpacing offline media, Isaac Weber, SVP Customer Success at media optimisation platform Measured suggests that considering ‘offline versus digital’ isn’t the most effective way to analyse changes in spend allocation over the long term. “Marketers will move money to where they are getting the best return. When the budget is being constricted,” he said, “they will generally keep spending with faster converting, more targeted channels.”
Similarly, Wesley Parker, co-founder and director of performance marketing agency Demand More, told Econsultancy that not all areas of digital are generating investment.
“We’re seeing downward pressure on digital channels that are less measurable such as programmatic and paid social that are typically used to engage users as an early touch point with a brand or to drive awareness,” he explained. “Secondly, we’re seeing brands increase their budgets across paid search and affiliates where they can see short term measurable returns for their investment, to help justify the spend to the business.”
Marketers will move money to where they are getting the best return. When the budget is being constricted – Isaac Weber, Measured
Indeed, ISBA’s report states that there will be a continued shift towards ‘short-termism’ next year, as more marketers focus on campaigns based on immediate need. However, Xavier Klein, Head of Performance UK at marketing and data consultancy Making Science, warns that marketers must be wary of this approach.
“With current budgets likely to stagnate or decline, brands must be careful not to over-invest in delivering low CPAs and strong ROAS for short-term success,” he said. “Those who do may hinder longer-term growth and efficiencies, which could in turn lead to under-developed brands across entire industries. While it may be easy to fall into a cyclical trend of short-termism, followed by higher funnel objectives and vice-versa, brands must not lose sight of long-term success and should invest carefully to grow efficiently.“
AppsFlyer’s Paul Wright agrees with this notion, stating that “if advertisers focus too acutely on short-term wins, they risk impacting retention, loyalty, and other factors that sustain business models in the long run. I expect to see a careful balancing act between achieving near-term goals and preparing for success when the economy recovers, which will be reflected in ad budgets.”
“Advertisers need more real-time measurement and diagnostic tools”
“The rate at which advertisers now have to adapt to changes in consumer behaviour, privacy policies, platform technology, regulations, and whatever else comes our way is not going to slow down,“ said Measured’s Isaac Weber. As a result, he continued, “advertisers will need more real time measurement and diagnostic tools to quickly identify what’s working, what’s not, and what to do about it.
“The click-based attribution methods (last-touch and multi-touch) we’ve relied on in the past are no longer viable as user-level tracking becomes a thing of the past. Platforms and vendors alike are now getting behind cohort-based measurement options like incrementality experiments and geo-matched market testing.”
Indeed, the need for accurate measurement was stated by most experts – ViewersLogic’s Andrew Carmody emphasised that marketers need to re-think their existing models.
“Budgets will be maintained only when the ROI can be measured accurately. Existing models for measurement today rely on assessing the impact of different media channels in silos, then patching them together to gain a ‘holistic’ view of what was achieved,” he said. “But this approach is flawed and makes marketers vulnerable to basing future media planning decisions on inaccurate correlations. Once marketers are able to meaningfully assess the contribution that each channel or combination of channels makes to a campaign, can they move budget to the areas that will enable them to drive success.”
Innovid’s Jo Kinsella also makes the point in relation to TV. “One of the key elements for advertisers heading into next year’s down market is going to be the need for measurement and effectiveness, and where there is a lack thereof, budgets will be reallocated,” she stated. “The economic stress will move the TV market towards outcomes metrics and greater transparency and flexibility to ensure that brands can account for every dollar, and closely manage and optimise across all TV platforms. The good news is that TV has made great progress, proving that with consistent measurement, advertisers can measure efficiency and effectiveness across different platforms.”
“Every channel, tactic, and campaign should be scrutinised and optimised”
So, what else for the future? Stephen Upstone, CEO and co-founder of LoopMe stated that “in this climate, performance is as important as ever.”
His advice to marketers is again to focus on real-time measurement. “By applying strong approaches using data and analytics in the mid-funnel in consideration, intent and visits, marketers can ensure they are leading new customer growth and maintaining brand equity that will transform their results over the next one to two years.”
Anthony Lamy, VP EMEA Client Partnerships at VidMob also suggests that while spend is being shifted to certain areas of digital media, marketers will still be challenged with smaller budgets, meaning they need to do more with less.
“Brands need to get smarter at re-utilizing existing content in innovative and impactful ways to manage ROI. In addition, audiences and brands are re-evaluating which platforms they engage with, so advertisers require a flexible approach to media budget allocation and creative production that can quickly pivot between channels,” he stated.
The entrance of new platforms and formats like TikTok is likely a key driver [of increased social spend] – John Nardone, Mediaocean
“To maintain campaign performance in the short term while budgets remain squeezed, creative data will be crucial in allowing media buyers to access pre- and mid-flight performance insights across platforms to adjust budget allocation accordingly. This will help to optimise results and avoid expensive campaign content, designed only for a platform that could fall from grace at any time.”
Mediaocean’s John Nardone says that a variety of platforms could also come into play. “We expect to see marketers increasingly leveraging the power of social media, exploring newer platforms they may not have previously engaged with,” he stated. “Data from our report found that most respondents were planning to dramatically increase their social investments over 2023. The entrance of new platforms and formats like TikTok is likely a key driver here.”
Lastly, while the recession could result in further budget cuts, Measured’s Isaac Weber says that marketers should be reluctant to make sweeping cuts across media portfolios. “If you are able to identify the least efficient areas of investment and cut there first, decreasing budgets do not have to equate to a crippling sacrifice in ROI,” he said.
“Advertisers should be focused on eliminating wasted spend and potentially even increasing investments when there is still room to profitably scale. Every channel, tactic, and campaign should be scrutinised and optimised, which can only be achieved by understanding what incremental conversions the media is driving.”