Progressive clients have learned a lesson from the last economic downturn, and that is: “You cannot throw the baby out with the bath water.”
That is the blunt assessment of one senior media buyer who challenged the sentiment of new research by Ebiquity and ISBA, saying that clients are not rushing to ditch brand-building channels such as linear TV in favour of digital media channels, but budgets will naturally be challenged as the looming recession strikes.
The snap poll of 59 brand advertisers, including 11 of the UK’s top 50 advertisers and accounting for more than £1.5bn in advertising, found 69% of respondents "agree strongly” or “agree” that 2023 budgets are under heavy scrutiny, with marketers required to justify investment.
And the majority of respondents are looking at their linear TV ad budgets, with 67% of respondents expecting to decrease their investment in the channel in 2023, more than any other channel.
On the flip side, 53% of respondents expect to increase their spend on advanced (ATV)/connected TV (CTV) – in other words, BVODs and other digitally served television. The revenue from BVOD from broadcasters in the UK is less than 20%.
Other channels' increases and declines are illustrated in the chart below. In the UK, more than 75% of advertising filters into digital channels, although this also includes the digitally served content from broadcasters and newsbrands.
Phil Smith, director general at ISBA, said: “The survey clearly shows the impact of recession on the spending plans of major brands.
“While there's a fine balance between the number intending to concentrate more on investment in brand and those spending more on performance, there's a general shift towards more flexibility of commitment and a significant swing towards digital delivery in every medium."
Digital vs traditional
The report shows that marketers are not looking to ditch brand over performance, but instead are planning to shift more investment into digitally served channels versus offline media – a trend that has been happening for a number of years but now may accelerate.
Vicky Radcliffe, managing partner of media experience at Omnicom’s PHD, told Campaign the move from traditional media to digital spend was not new.
“The findings… mirror the existing audience consumption trend of TV content viewing shifting from linear (live) to on demand and broadcasters are set up to deliver the content in line with how the consumers view the content; they don’t delineate between the two,” she said.
Radcliffe added: “As an industry, there’s an obsession with the offline vs online and ‘traditional’ vs digital conversation, when in reality almost every media platform is digital in some sense and brands have launched – and continue to launch – platforms that don’t differentiate between the two, ITV’s ITVX being the latest to do just that.
“Audiences consuming the content don’t view it as different and we all need to temper the ongoing comparison of the two.”
It’s a point that was emphasised by Omnicom Media Group chief investment officer Adam Turner, who told Campaign: “The results are interesting but it’s important to have a progressive approach toward how we assess and measure the digital and non-digital components of each media. For example, the apparent shift away from linear TV needs to be viewed in the context of broadcasters’ digital-first strategies and audiences consuming the same content in a different way.
“Advertisers’ investment strategies are shifting to reflect where their customers are available in order to maximise and deliver the most efficient outcomes.”
This was a common theme among media buyers Campaign approached. In the past linear and BVOD were separate lines on a media plan but with the introduction of CFlight (which was introduced in the UK market by Sky's parent company Comcast) which marries linear and digital viewing figures to eliminate duplication, the delineation makes no sense.
At ITV, digital ad sales are about 14% of total ad revenue. At Channel 4, it is about 19% with a target of 30% of all revenue to come from digital advertising from 2025.
When scrutinising the research, it becomes clear that several “traditional” offline channels are in decline as budgets shift towards their digital counterparts (see chart below). However, there were a couple of exceptions: marketers said they planned an increase in radio and digital audio, while budgets in print and digital display – which encompasses much more than the websites of newspapers and magazines – are both in decline.
These are not uncommon trends. Offline media channels have long been in decline and shifting towards their digitally served products. For example, ITV and Channel 4 have both been very clear that they are focusing more on advertising-funded streaming platforms. ITV is launching ITVX in December, which will greatly expand its on demand catalogue of programming and inventory, while serving up much more prime-time programming via streaming first.
Channel 4 already has a vast catalogue of programming on its All 4 service versus rivals, and has recently struck a deal with YouTube to produce more content that can reach and entice younger audiences towards its brand.
What the ISBA/Ebiquity study does reveal is that marketers are taking a “calm and measured” approach to their media budgets, which are often one area large companies tend to cut at times of economic duress.
Richard Oliver, UK head of IPG Mediabrands investment arm Magna, told Campaign he has seen maturity in how marketers are responding to this downturn compared with the previous downturns.
“It’s a very different set of behaviours to those we saw at the beginning of the pandemic or during the last recession, over a decade ago, where big decisions were taken quickly and swingeing cuts made to budgets,” Oliver said.
He added: “Marketers have a far better understanding of the impact of branding and performance on their business, and how to combine the two, than they did at the time of the financial crisis."
Oliver reckoned most advertisers he dealt with were “match fit” and that the shifts between traditional media channels and digital were just being accelerated.
Also, he added: “Ultimately we don’t need to wait until 2023 to see how prescient this research is as the recession is already here, and advertisers are already reacting. Belts are being tightened and smart planning is under way, with a clear focus on what advertisers know works for them.”
Most media buyers speaking to Campaign broadly agreed with the trends identified in the study, but suggested they were nothing new and there were some important nuances that have not been flagged.
The first of these is that marketers are already grappling with reduced budgets due to the cost-of-living crisis; for example, TV has seen fewer new advertisers on TV this year (675 brands) compared with 2021 (1,200).
Part of the reason for this is that during the tail end of Covid-19, a plethora of online brands flourished and invested heavily in TV, such as grocery (Getir, Gorilla), restaurant home delivery apps (Deliveroo and Just Eat). That demand has now waned and media budgets for some of these brands have followed.
There have also been declines in second-hand car market apps, the likes of Cazoo and Cinch, and other businesses that thrived during a period where ecommerce was popular.
A media buyer speaking to Campaign under the condition of anonymity said part of the decline in investment was due to online brands and start-ups scaling back.
“A lot of digital companies that were out there and took advantage of Covid will scale back their spend in expensive brand building channels and pivot towards performance or collapse," the buyer said.
There are also supply chain issues due to the war in Ukraine that are holding up how companies go to market with products. Electronics manufacturers are notable, but also automobile companies are experiencing delays for new vehicles due to the supply chain grind.
One media buying group, who spoke to Campaign anonymously, said the advertising market in the UK should grow 3% next year, but TV ad spend may be down in low single digits or flat: "That would be an encouraging result at a time of soaring inflation and recession".
Another senior media group investment chief added: “There’s a lot of uncertainty in the market. But [marketers] are becoming more aware you can only go so far with personalised advertising and you need to build brand alongside with it.
“The more progressive clients realise you cannot throw the baby out with the bath water, but the problem is that in a recession it can be challenging to think long term. You may be locked in a battle where it is marketing vs procurement or marketing vs finance.”
The ISBA/Ebiquity report highlights a long-term trend – post-Covid bumps aside – that the traditional analogue way of delivering content is migrating to digital. It also turns a spotlight on brands being cautious and the battle between long-term brand building marketing activity versus short-term performance.
These are not new, but the context is different. Media buyers seem confident that marketers have learned from the missteps of the past. Time will tell.