Marketing budgets fall under heavy scrutiny as risk of prolonged slowdown in 2023 rises
By Seb Joseph
Come next year things are going to go from bad to worse. Senior marketers know it and are already making contingency plans. Read: rationalizing ad dollars.
Less than a third (29%) of the world’s largest advertisers plan to slash ad dollars next year, according to a study of 43 multinational companies from the World Federation of Advertisers (WFA) and Ebiquity. Three quarters of the sample “agree strongly” or “agree” that 2023 budgets are under heavy scrutiny.
Marketers are already being required to justify their investments. For many of them, 2023 will feel a lot like a recession.
It’s not all doom and gloom. Some of those marketers surveyed (28%) claim they will invest more next year, per the study. Which really reinforces one overriding aspect of economic downturns: they affect everyone, but some more than others.
That was clear at a gathering of senior agency execs organized by Digiday earlier this month. Some of the execs were confident their clients would spend their way through the downturn, many others though were concerned they’d do the opposite. Everyone agreed tighter financial conditions are unavoidable. As one attendee put it: “We’re having some tough, awkward conversations with clients about 2023.”
Further signs: Deloitte’s quarterly CFO study revealed that over half (55%) of CFOs have tilted to defensive strategies, with cost reduction and cash control as their top two priorities. Spoiler alert: advertising is always cut in prolonged downturns because it is a variable cost that can be quickly halted. It’s a cliche for a reason.
And for the eternal optimists out there, here’s a more sobering view courtesy of Daniel Knapp, chief economist at IAB Europe: “The economic situation may account for 10 to 20% of the current advertising slowdown. That won’t change before the end of the year. There are still big cyclical drivers of advertising to come. The real winter of discontent will start in the first quarter of 2023.”
The prelude to 2023
Everything so far — the renegotiated media deals, rationalized social spending, even the pivot to short-termism from SMEs — has been a prelude to what’s in store once the economic turmoil catches up to marketers. The contraction in ad dollars up to this point has been less to do with the widespread inflation, high inflation rates and more to do with structural factors.
Think about it: The Facebook slowdown? Less down to recession-wary marketers, more the direct to consumer craze slamming into reality. Digital ad prices up, accuracy down? Blame the loss of data, not inflation. Absent automotive advertisers? They don’t have enough stock to advertise thanks to supply chain woes and microchip shortages.
There was always going to be an ad slowdown — just not an economically-induced one. If it had been, the reverberations of it would’ve been more widely felt. Squeezed agency fees would’ve been lamented more loudly. Slower advertising would’ve hit TV broadcasters harder, not just the platforms. Consumers would’ve balked at price inflation across the board.
Instead, the slowdown hit one side of the market …read more
Source:: Digiday
