Even digital will feel the pinch as media buyers cut forecasts amid a rising tide of anxiety

With the latest quarterly Bellwether Report from The Institute for Practitioners in Advertising, published July 21, commentators can add survey data sourced from 300 of the U.K.’s leading advertising media companies to support such testimony.

The report, which outlines companies’ ad spending intentions and financial confidence in the U.K., indicates that recession fears are rising fast among marketers.

Here’s a breakdown of the numbers:

• Around a quarter (24.2%) of surveyed companies raised their total marketing expenditure during the second quarter, while 13.4% registered budget cuts.
• Main media — or above-the-line advertising including TV — saw advertising budgets stall, ending a year-long run of growth. At 0.0%, the net balance was down sharply from +9.4%. Online (+4.4%, from +18.6%) and video (+0.8%, from +9.0%) ad spending growth continued, albeit far less than had been in previous quarters.
• Own-company financial prospects slipped into negative territory for the first time since Q3 2020. A net balance of -9.5% of companies signaled pessimism regarding their own-company performance, the most downbeat for two years.

With that said, however, advertisers aren’t making drastic cuts to ad spending or reacting to macro concerns just yet. Yes, they’re being cautious about what happens next, but for now they’re going to carry on spending.

“Amid a deteriorating economic outlook for U.K. businesses, sustained growth in total marketing activity is encouraging,” said Joe Hayes, senior economist at S&P Global Market Intelligence and author of the Bellwether Report. “However, the stagnation in main media marketing budgets is a disappointing result from the Q2 survey and suggests concerns around the outlook are weighing on decision making. Risks are clearly skewed to the downside as the intensifying cost of living crisis weighs on disposable incomes, while firms face difficult decisions regarding their spending at a time when their cost burdens continue to inflate.”

The bottom line is that pessimism is peaking among marketers. 

There are promising economic signs to hold onto, from high employment to sustained consumer spending. But global growth and profit expectations seem to be in a constant state of downward revisions, which feed into recession expectations. Contradictory forces like this would challenge even the most ardent optimist. There are tough choices ahead for senior marketers.

“Given the current economic climate, media spend cuts are to be expected. But with so much financial uncertainty ahead, brand advertisers need to be able to identify where to make these budget changes, and by how much,” said Jay Stevens, CEO of media data management company Redmill Solutions. “These often complex decisions can put pressure on CMOs; they need to have a clear line of sight on their global media data to justify spending and make informed decisions on any cuts.”

Commitments maintained, forecasts cut

How close senior marketers are to making these calls will become clearer as we get deeper into the earnings window. More often than not, CEOs will use these quarterly earnings updates to give analysts a steer on whether they see advertising as a cost to cut or a cost of growth during a downturn. At this point, it sounds like some companies are looking to make cuts sooner, not later.

Sources at U.K.-based media owners told Digiday that, as speculation grows over a significant downturn in the economic climate there, some media buyers indicate advertisers will press “pause” on traditional channels such as print and TV. 

One senior media agency source told Digiday their company is planning for a recession as clients moderate spending on offline channels and look to reduce fees. Although, in an indication that outright panic has yet to set in, the slowdown stops short of reneging on earlier spending commitments.

For some, this is still a “canary in the coal mine,” with the second half of 2022 likely to be a testing period. Even Alphabet and Meta, the parent companies of the two biggest companies in media, are reportedly starting to pump the brakes in terms of overheads and staffing.

Supply chain issues exacerbated by Russia’s invasion of Ukraine have caused advertisers to curb their ad spend (auto manufacturers, in particular). Magnite’s leadership cited the trend as a headwind in a recent earnings call, and experts predicted it will extend to 2023. In fact, TV ad spending among the top 10 largest automotive advertisers has dipped this year.

A separate source at an agency holding group noted how the growth of pay-per-click and programmatic spend slowed since Q2, albeit they were slightly up compared to 12 months prior.

Speaking separately, Advertisers Perceptions’ director of forecasting Eric Haggstrom told Digiday he was expecting to see a partial dip in programmatic spend followed by an “even sharper rebound” in 2023, as marketers probed the transparency of such means of media investment. 

Indeed, a 2020 transparency study from PricewaterhouseCoopers commissioned by the Association of National Advertisers found that 15% of spend by marketers in the U.K. simply couldn’t be accounted for.

Meanwhile, budgets for paid search campaigns — normally a robust performer for those advertisers hell-bent on proving how their ads are driving performance — are flat compared with 2021, according to the same source.