‘Stability with transformation’: Insights into the turbulent landscape of 2024 advertising

Take a deep breath. What a whirlwind start to 2024 it’s been.

And it’s clearly not going to slow down anytime soon. This month alone, there’s been more job cuts, ambitious ad tech initiatives launching, the heat turning up between advertisers and platforms, and the ongoing debates about the future of in-depth tracking.

To put it bluntly, uncertainty is the name of the game, and it seems like it’ll hang around for most of the year. In many respects, 2024 might as well be labeled a transition period — a time when marketers will gain clarity on the structural transformation the industry is currently entangled in, and learning what they do and don’t know.

One thing that’s crystal clear, though, is the resilience of ad spending. According to ad executives, forecasters and consultants, it’s set to stand strong throughout the year.

In the U.S., for example, ad spending is projected to surge by 4.4% this year to reach $570 billion, excluding political advertising, per Winterberry Group. With political ads included, the growth rate soars to 10.4%, hitting $587 billion. Across the pond in the United Kingdom, IPG’s media intelligence arm Magna has predicted a 5.7% growth in ad spend for 2024, up from 3.7% in 2023. And on a global scale, Insider Intelligence reports a similar trend, with ad spending expected to grow by nearly 10% this year.

These forecasts may not match the dizzying heights of 2021, but that was a unique rebound fueled by pandemic-driven growth in 2020.

What’s actually happening now is a course correction, with the market aligning with pre-pandemic growth levels. So, even as ad spending appears to be slowing, it continues to grow. In fact, advertisers have navigated their way through the turbulent economic conditions of the past 18 months or so by strategic spending — either outpacing emerging competitors or capitalizing on the missteps of incumbents.

This is coming through loud and clear the latest earnings window.

Prominent advertisers like Mondelez, Clorox and Adidas have either disclosed significant increases in their ad spending during the last quarter or have committed to further ramping it up throughout 2024. On the other hand, Meta and Google, both of which run ads businesses that are predominantly based on smaller advertisers, and two companies that have also had layoffs across their businesses already this year, posted bumper quarters.

Even publishers are cautiously optimistic about the state of the ad market in 2024. But they’re also not taking any chances.

Many publishers kicked off the year at CES and Davos to try and get as much face-to-face time with prospective advertisers as possible with hopes that those conversations will transpire into revenue in Q3 and Q4. But they were also using those tentpole moments to springboard their events businesses, given all of the interest around experiential sponsorship that grew in 2023. Events, research and video are three main areas of focus for publishers to try and center their direct-sold ad businesses on and, as a result, there’s been a degree of investment into building out those teams heading into 2024.

Surprisingly, even the looming demise of third-party cookies has not dampened publisher optimism for the remainder of the year. Some publishers are feeling optimistic about the cookie-less alternatives that they’ve tested and the results thus far, while others feel a bit more insulated by the contextual targeting, first-party data solutions that they’ve built up within their companies.

“We don’t need cookies to target. We don’t use alternative IDs to target and we have 100% addressability when we use our cookie-less D/Cipher solution to do this,” said John Roberts, chief innovation officer at Dotdash Meredith. “[D/Cipher is] cookie-less and it reaches all of iOS and anybody with a cookie. It outperforms even on cookie inventory. I think there’s an easy mistake to make, which is saying cookies scale, the solutions don’t. Cookies don’t scale because they already miss half the market … if you can’t reach the whole country, that’s not a scalable solution.”

Advertisers, at least the ones paying attention, seem to be of a similar mind. 

“When the third-party cookie is finally gone we won’t shed a tear,” said Catherine Lautier, Danone’s global head of media and brand communications. “I think given the poor quality of the data that was coming from those cookies it won’t be a big loss.”

Time will reveal if marketers and ad execs remain as unfazed by the loss of cookies. In the interim, they face a slew of more immediate challenges, from the evolving categorization of TV to the fragmentation of retail media and the perennial issue of brand safety. Arguably, the most pressing of these challenges is the aftermath of the ongoing wave of layoffs that has swept through the platforms.

This has left some advertisers with leaner account teams, posing an additional challenge to their operations. As one marketer candidly disclosed under the veil of anonymity, “The Meta team we work with is pulling staff and replacing it with AI. We’ve had no say in the matter. The tonality of the way we’ve been told about it is finite and frankly speaking downright negative.”

Yet, despite their concerns, Meta’s communications around the situation have essentially presented advertisers with a “take it or leave it” ultimatum, leaving them with limited recourse. The marketer expanded on the point: “The subtext I got from Meta’s update was basically, ‘This is our position, and that’s it — there’s no negotiation.’ What can I do?”

However, one area where marketers are taking more proactive measures is in the realm of gaming. While it may not currently be a significant area of spending or one of the fastest-growing areas, it is garnering increased attention from marketers who had previously overlooked it last year.

In 2024, advertisers are creeping back into gaming and esports, but spending their budgets with far more discretion than in past years. Marketers are growing more familiar with the sheer variety of ways to engage with the gaming audience, turning their focus toward more targeted influencer campaigns or in-game brand activations rather than simply throwing money into Twitch pre-roll ads or logo slaps on esports teams’ jerseys.

Despite expectations from some investors in the sector, neither pandemic lockdowns nor the introduction of updated IAB measurement standards led to the anticipated explosion in in-game advertising in recent years. Nonetheless, executives at in-game advertising companies informed Digiday that ad spend in games is steadily rising as brands grow more confident in gaming as a marketing channel.

“I don’t think that gaming is this massive unlock that’s going to all of a sudden create more spend in the digital advertising space,” said Kristan Rivers, CEO of in-game advertising firm AdInMo. “When I look at the share of wallet for in-game advertising, the barriers seem to be getting lower and lower.”

On this basis, in-game advertising, like so many other addressable mediums, has, and will continue to, be at the mercy of flexibility in advertising. Since the pandemic, marketers have been seeking more flexible ways to spend money with media owners. For example, rather than committing funds to a media owner for a quarter, they prefer agreements that span longer periods.

“Spending, for the most part at least, is still structured around an annual budget with quarterly commitments,” said Bruce Biegel, senior managing partner at Winterberry Group. Everybody’s still nervous of the shoe dropping, which is what happened last year. There was the banking crisis, interest rates, wars — there was always another shoe to drop. Marketers had to be nimble as a result.

When multiple significant shifts converge as they are here, consolidation tends to follow suit, and this time is no exception. Larger companies are actively seeking acquisition targets, while smaller ones feel the pressure to cash in their chips amid the prevailing uncertainty. Already, we’ve seen signs of this activity, such as LiveRamp’s intention to purchase data clean room provider Habu. Expect more of the same in the second half of the year as confidence in the market firms up and interest rates stabilize. 

“We are hearing from most of the specialist bankers in the sector that their pitch activity, which precedes companies coming on market by about six months, in the fourth quarter started to really accelerate,” said Biegel. “If last year was uncertainty, this year we have some stability with transformation and that’s the point where people start to buy.”

Which is to say 2024 is to be a tumultuous year for marketers — but then again, when isn’t it?

https://digiday.com/?p=534244

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