In Q1, marketers pivot to spending backed by AI and measurement

Massive advertisers like P&G, Kimberly Clark and others have already set the tone, focused on improving the effectiveness of its advertising — at least that’s the case based on earnings calls at the start of the year.

Advertisers aren’t pulling back on spend (they’ve already learned that lesson), but every dollar that is spent better count toward the bottom line. That means data, measurement and performance are shaping Q1 ad budgets.

“Budgets have remained mostly flat from where we forecasted for the year… we have seen a little bit more push into bottom of the funnel,” said Mile Marker president and CEO Scott Shamberg, without revealing specific figures.

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This isn’t the playbook of the last digital bust. where budget skewed toward performance. Madison & Wall consultancy forecast that U.S. ad revenue will grow 6.6% this year (excluding political ads) following an 11% surge in 2025. However, coming out of a turbulent Q4, advertisers still have spend under a microscope.

“After a big swing toward performance in 2025, things are starting to rebalance,” Taylor Miles, vp of human insights and strategy at Two Tango Collaborative, a creative and media agency, said in an email to Digiday. Miles added, “Brands are bringing brand marketing back into the mix, not instead of performance, but alongside it.”

Citing diminishing returns, advertisers are shifting budgets away from Meta and Google, and toward brand channels — but still with the expectation of performance. There are also more dollars carved out for incrementality testing frameworks, internal media mix modeling dashboards and customer relationship management systems. All signs point to a push for accountability and ROI, especially as performance channels are delivering diminishing returns, per agency execs.

“[It’s] like the Emperor’s gown is slightly open and people [are] starting to question the efficacy of some of these investments, or some of these hypotheses,” said Ryan Kangisser, the chief strategy officer and managing partner of media consultancy MediaSense.

Or as Tucker Matheson, co-CEO and co-founder, at performance media agency Markacy, puts it: “everybody’s trying to get out of Meta [and] Google and start spending top-of-funnel.” Still, the brand spend must be backed by performance to connect top-of-funnel and bottom-funnel spending and ensure accountability, Matheson added.

Digiday recently reported that brands and their agency partners are still pushing to own their first-party data as opposed to relying on third-party walled gardens. Advancements in generative AI have only made that path to ownership easier.

As dollars come out of the traditional digital duopoly, they’re going into upper and mid-funnel channels to find new shoppers across retail media networks, CTV and YouTube. Case in point: brands like Procter & Gamble and Diageo are placing larger bets on retail media based on recent earnings calls. 

Still, there’s a cautiousness to this approach, said David Dweck, president of digital shop Go Fish. Last year, those channels like YouTube and CTV looked strong. This year, clients are more reticent in their spend until there’s clearer proof that those channels are actually driving results, he said. 

“Just because things measure well doesn’t mean they’re actually driving performance. And that’s a mantra that I wish all advertisers could wrap their arms around,” he said.

— Sam Bradley contributed reporting to this story