Ad industry shifts 2023 budgets as recession now looks inevitable

By Seb Joseph

It’s September, so that can only mean one thing for marketers: the start of budgeting season. And this year it’s turning out to be more headache-inducing than ever.

Intel on jobs, inflation and consumer spending are giving marketers mixed signals, making it harder to see whether to stay the course or pivot with advertising through all the turmoil. Still, there is a broad consensus on one thing: A recession is coming next year. And regardless of when (or where) it does hit, flexibility is going to be key to how much advertising contracts.

“When it comes to how we’re advising clients about advertising next year, a lot of it comes down to balancing both short-term and long-term goals so we’re prioritizing flexibility, which will give our clients the fluidity to adapt as their business needs evolve,” said Katie Klein, the chief investment officer for PHD in the U.S. “We want to work with [media] partners that have the greatest ability to pivot with our clients, and that could be in the realm of audiences, inventory, price and performance.”

Flexibility already dominates many of the early discussions across the industry about how much ad dollars are to be spent next year, according to nine ad execs interviewed for this article. From those conversations, it’s clear that marketers want more wiggle room in the deals they’re making, especially when it comes to ad commitments, budgets, campaign scheduling and media costs. They will price in a full budget (it seems), but with high flexibility to cut as the recession kicks in.

“Given price inflation and the current economic situation, agencies will want the wriggle room to argue that significant changes in the budget should mean that any inflation mitigation mechanism is set aside,” said Nick Swimer, former head of legal at U.K. broadcaster Channel 4, and now partner at international law firm Reed Smith. “Next year will see the minutiae and detailed terms of media buying agreements under more scrutiny than ever.”

When those decisions are made will depend on several factors, from the state of the supply chain to inflation pressures. Each one has a domino effect, with the ability to affect everything from whether a campaign is pushed or pulled from a market to having to cancel local media deals or shift those agreed dollars back another quarter. Needless to say, there’s a lot of scenario planning going on right now.

“Budget planning appears to be cautious,” said Nick Waters, group CEO of media management business Ebiquity. “There are very few clients that have yet been explicit that budgets will be cut.”

The data backs this up: Whether it’s from agencies, trade bodies or Digiday, it all points to one thing: Marketers are bracing for a recession, but with a wait-and-see approach.

“From what I’ve seen so far, budgets for next year are looking flat versus this year driven by the recognition it’s better to spend through a recession than to not, and also the inflationary pressures meaning they need to …read more

Source:: Digiday