A surge in new advertisers, including many start-ups and venture capital-backed disruptor brands, has helped to support adspend during the pandemic.
Second-hand car websites such as Cazoo, Cinch and Motorway and rapid-delivery grocery apps such as Getir, Gopuff and Gorillas have been among the recent entrants that have been spending big.
AAR data shows 47% of UK creative agency appointments in 2021 were not replacing an incumbent agency and WPP credited a big increase in the number of ecommerce advertisers for driving growth when it reported its annual results last week.
“New, app-based or digital-first businesses are able to afford to invest a greater proportion of their income into marketing to grow scale fast because they lack the physical presence (and associated costs such as rent) of traditional businesses,” WPP said.
However, some industry watchers have warned that rising cost inflation and a decline in tech valuations – Meta, Netflix and Peloton are among the stocks that have tumbled in value since January – could affect the willingness of some VC backers to invest so heavily in advertising in future.
So, is the boom in new advertisers a bubble that's about to burst?
Managing director, Bartle Bogle Hegarty London
I hope not. One of the things I love about our industry is how it facilitates new business models, trends and category shifts. It's something I embrace and I have thoroughly enjoyed getting to know today's latest and soon to be greatest, like our new client Wild [a natural deodorant brand].
The challenge is whether this new breed of clients are up for partnering in an equally fresh way. There is much debate around industry burnout and the role the emotionally and financially draining pitch process plays in this; new advertisers represent an opportunity to meet agility head-on.
How about a well-prepped chemistry session and an open chat on remunerations models instead?
Global president, business intelligence, Group M
CB Insights estimates $621 billion was invested in early-stage companies during 2021, up from $294 billion in 2020. For many of the larger beneficiaries, much of the cash raised went straight into advertising. As they are often investing in advertising well ahead of the cashflow their customers should ultimately provide, these companies will mostly remain dependent on external sources of capital. So long as that capital continues to flow and reward near-term revenue growth at nearly any cost, these new marketers will maintain an extraordinary capacity to spend significant sums on advertising.
If recent fundraisings by VC firms provide us with a clue – according to Pitchbook, US-based VCs alone raised a record $128 billion in 2021, up from $87 billion in 2020 – significant “dry powder” for activity of this nature remains in place for now.
Managing director, Abbott Mead Vickers BBDO
We’re living in a time of massive challenge – to our planet, our institutions, our well-being – and massive innovation – in science, technology, and business. This environment offers a whole generation of entrepreneurs the opportunity to build fascinating new businesses to tackle those challenges and unlock that innovation.
The ones that succeed will make a genuine difference - meeting a real need, solving a real problem, and adding real value for people – and marketing will be central to their success. For many the bubble will burst. But some will become market leaders in dynamic new categories that change the world. I’d take the meeting.
Founder, The Barber Shop
No. What may seem as a boom in new advertisers is really a shift in scale-ups 'marketing mentality'. This has gone from believing they have the expertise to do it all with their abundance of data and access to performance marketing channels, to realising that approach quickly hits a performance ceiling. Getir was founded in 2015, Bumble in 2014, and Waze is 16 years old, all of these brands have realised their potential of DIY marketing, and are now needing to persuade those that don’t know or don’t care about them, in an increasingly dispersed and remote world, a world where marketing with professionals can take brands from good to great.
It’s only getting started (in our opinion). As the world changes faster than ever and people increasingly want better brands, doing better things, in better ways - there are going to be loads more new advertisers coming into the market. The majority of these new brands are typically backed by venture firms who increasingly understand the need for high quality, differentiated branding and communications to scale fast and create ultimate business value. They’re also not short of ambition (and budgets) so as more of these brands succeed through advertising to big audiences, more will follow them. It makes for an exciting future.
What we’ve experienced is a surge of new money from new advertisers, waiting for a post-pandemic confidence to invest. So, yes, I suspect this may slow down. But by how much will depend on two important questions. Firstly, as the results from new advertisers start coming in, investors will be asking tougher questions about their marketing plans. That is no bad thing. Better questions lead to better performance. The second question, however, is what I am more concerned about. The cost of living is dramatically increasing and wages are not keeping up. Consumers will therefore also be questioning what they spend their money on. This will impact every business, new and established.
Having started two agencies through two boom-bubble-or-bust periods, one thing I can’t emphasise enough to any advertiser – yes invest, but only the sharpest propositions will convince consumers or investors to back your brand.
Geoff de Burca
Chief strategy officer, MediaCom
I certainly can’t foresee the bubble bursting for new advertisers anytime soon. The rise in start-ups shows no sign of slowing and shifts in consumer behaviour – due to covid and emerging tech – mean that the barriers for entry have decreased significantly. Every single industry continues to be disrupted by startups, and even those who have previously disrupted are being disrupted – evidence of how rapidly things change.
At MediaCom we speak to both VCs and startups, and it’s clear from these conversations that there comes a point when you can no longer rely on being a new-to-market disrupter; at which point the best way to mature into a bigger player is through investing in advertising. These businesses require different advice and approaches, so we have a team, Springboard, dedicated to devising and delivering strategies that are specific to disruptive high growth clients such as start-ups and scale-ups.
Head of new business and marketing, Wunderman Thompson
The pandemic shone a light on just how intrinsically advertising is linked to the success of a brand, with many brands’ routes to market and purpose needing a rapid rethink overnight.
Those who had previously gone it alone called on adland to bring them the expertise they didn’t have in-house, or had never needed before, whether it be commerce, experience, data chops or branding experts.
It’s important we continually interrogate and challenge our client partners on whether the problem put in front of us is actually the problem we need to solve to deliver a whole brand experience and drive long-standing growth.
That way, we can continually inflate the balloon rather than letting it burst.