The latest IPA Bellwether report has signalled a stalling of growth in UK marketing budgets, following what had been a more positive start to the year.
Overall marketing budgets in the UK flatlined, with 0% growth observed over the next three months.
Confidence in own-company financial prospects has also plummeted to the lowest levels observed since 2011, largely attributed to political uncertainty.
However, internet marketing budgets are set to increase by 11.5%, driven by continued technological innovation.
Net UK marketing budgets flatline, with 0% growth/decline forecast following +8.7% increase in Q1 2019. The decline has largely been attributed to rising political uncertainty the UK, with the ongoing uncertainty surrounding Brexit and leadership, along with the ongoing US-China trade war.
Optimism for own company finances are at lowest levels since Q4 2011, with a net optimism/pessimism balance of -9.8%.
Internet marketing budgets belie the negative trend, with a total of 11.5% of companies reporting an increase in digital and social spending in the quarter.
Modest increases in budget are forecast over the remainder of the year, with more substantial improvements set to take effect in 2020.
New digital technologies were again identified as significant opportunities across several markets, including financial services, automotive and industrial. As mentioned, the most prominent threat across UK industries was the uncertainty surrounding Brexit, which has worsened over the last few months with uncertainty over leadership direction and murmurings of an upcoming snap election.
IPA Bellwether: industry analysis
Damon Reeve, CEO, The Ozone Project, said: “It is little surprise that the latest report shows no overall growth in the current economic climate. However, it is promising to see that internet marketing continues to perform as the most effective mode of marketing, showing signs of steady growth (+ 11.5% from the last quarter) and this is expected to rise in 2020. Over a quarter of those surveyed recorded upward revisions to their advertising spend despite overarching budget cuts. This is consistent with the current demand from our clients on their media adspend. What we’re seeing is a heightened appetite amongst advertisers to reach engaged audiences at scale through brand safe and trusted content environments, and in turn this is giving agencies the confidence to do the same.
“For premium publishers, while adspend is only projected to grow modestly, there are still opportunities to attract a greater share of total adspend through scaled audience monetisation, first-party identity and publisher-owned technology. As the dominant technology players come under more scrutiny, we hope to see more opportunities for publishers and brands to capture the future growth.”
Julia Smith, Director of Communications, Impact, said: “In a year of politico-economic uncertainty it was always expected that 2019 would see modest growth; social media aside which continues to see significant spend increases. Perhaps more surprising was the rise of negative own-company financial prospects. I personally think any effect will be negligible but there was always going to be casualties of the overpowering and money draining duopoly on some businesses. Companies need to continue to diversify and expand their partnerships to generate strong areas of revenue. This, along with the general improved forecast in 2020 will keep momentum and hopefully spend will continue to increase through to the end of the year.”
Elizabeth Brennan, Commercial Director, UK, Criteo, said: “The latest IPA Bellwether Report clearly shows that this is the year of marketing consolidation. Budgets are remaining static as marketers are expected to deliver results across a fragmented number of channels.
However, while spend may not be increasing this year, savvy marketers have the opportunity to ensure that performance improves ahead of wider investment in 2020.
The key lies in unlocking the value of data. For example, individual-level personalisation will allow marketers to get the most from the data they have and the budgets that do exist. Leveraging machine learning models optimised against key business objectives will ensure that the 2019’s marketing activities are designed to get the most value from available spend.
What’s more, with artificial intelligence (AI), it’s becoming possible to achieve hyper-relevant ads for true one-to-one offers, content, and ads. Investing in predictive learning models now will help in the long term when it comes to showing shoppers the new products they most likely want to see as AI-powered product recommendation ads improve over time. Marketers work day in, day out to get the right products in front of consumers at the moment they’re most likely to buy. The advancement of technologies like artificial intelligence will enable marketers to do more with the budgets they have and ensure that while spend might not be increasing this year, they can ensure that performance does!”
Anna Forbes, UK General Manager at The Trade Desk, said: “It’s notable that, in a quarter of flatlining marketing budgets, the one bright spot of growth is internet-based advertising. We’ve seen a significant increase in the number of brands upskilling in digital advertising over the past couple of years, and these results go to show that marketers no longer see digital as an ‘add-on’ but rather as a core element of their strategy. With such trends set to continue, I think it’s likely that in just a few years we’ll no longer actually be talking about ‘programmatic’ as a specific type of advertising – it’ll just be how ads are bought as standard.
“But with such power comes great responsibility for our industry. Currently, poor ID matching on the open web means advertisers aren’t able to reach a significant portion of their own, existing customers – never mind new ones. That’s why we’ve created a common currency for anonymous cookie IDs that is available to all and free to use. By working together across the industry, we’ll improve the advertising experience for brands, publishers and consumers alike – ensuring that we see the share of budgets allocated to digital advertising continue to grow and grow.”
Alessandra Di Lorenzo, CEO of Forward, lastminute.com’s media company, said: “If I had to make two conclusions from this recent Q2 IPA Bellwether, the first would be that there are no surprises – we all know that brands across the UK are concerned about Brexit, unpredictable politics and the implications on business and consumer spend.
“Second, despite marketers being cautious in the current climate, it’s really promising to see marketers predicting increased investment in ad spend in 2020. There’s a delicate balance to maintain between short-term and longer-term goals, and it’s imperative that marketers remember to keep looking forward.
“According to Winmo, the average CMO is in their role for less than four years. This means that many marketers may end up focusing much more on the day-to-day, quarter-to-quarter delivery, rather than higher-level strategy around how marketing can make a positive impact on business success. Which, arguably, should be a priority for these turbulent times. The air of caution in the market when it comes to spending on marketing activity highlights the need for businesses to take a step back and look at how they can gain more control of, and impact from, their marketing spend – thinking about this bigger picture is key for organisations to survive, and thrive.
“If businesses are wary of what the future holds, it’s time for marketers to assert their presence in the boardroom and influence commercial decisions. If brands don’t start taking a longer-term and more strategic view, they’re going to undermine the marketing function – and its survival for the future.”
Kirsty Giordani, Executive Director, International Advertising Association (UK Chapter), said: “Despite the negative outlook of the latest Bellwether report, there are still a number of positives. For example, spend in internet marketing remains strong and main media, digital and social have also been given another boost. The upward trend in these areas indicates a move towards longer-term thinking from marketers as they look to invest in channels and tactics that will support steady brand growth over time.
“While we’re in an uncertain political climate, it is often tempting to focus on immediate performance metrics to measure success and allocate spend, but a bigger picture view is needed. It’s important for marketers not to neglect branding activities that will drive continued recognition, and focus their budget on the channels (like digital, social and events) where consumer audiences remain engaged and receptive.”
Andrew Buckman, COO, Sublime, said: “As uncertainty over Brexit and the Conservative Party leadership continues, the lack of growth in marketing budgets hardly comes as a surprise, as highlighted in the findings of the latest IPA Bellwether report. Despite businesses being increasingly cautious with their budgets, it is however encouraging to see marketers still finding value in digital branding. Digital remains a highly lucrative advertising channel; meaning there will always be demand for campaigns that provide a non-intrusive and engaging consumer experience.
“The lead up to summer might be less exciting than 2018, however, until economic and political concerns are clarified, it is likely the rest of the year will follow suit. It will be interesting to see how the UK’s official departure from the European Union in October will affect the industry, as well as the country.”
James Draper, Founder and CEO, Bidstack, said: “As marketing budgets stagnate and industry confidence wanes in times of uncertainty, marketers are looking for new avenues to reach audiences and boost brand awareness. Digital and social channels are continuing to prove a fruitful and effective way of advertising to a captive and engaged audience. We know from experience that in-game advertising is one such channel, and expect to see a growing trend toward marketers leveraging gaming platforms to reach their audiences in the virtual world.”
Fabrizio Perrone, CEO and Founder, Buzzoole, said: “It’s heartening to see social media and digital spend continue to grow and that marketers understand the benefits of focusing on these measurable channels to reach and engage with consumers.”
“To keep their share of today’s market, brands must be agile, innovative and ROI-focused. Smart marketers will be integrating social into their wider strategy – for example, integrating influencer marketing into digital OOH to create measurable authentic campaigns that resonate with consumers.”
Charlie Johnson, VP UK & Ireland, Digital Element, said: ‘‘With so many factors currently causing uncertainty in the UK – especially in the political and economic worlds – it is no surprise that the increase in marketing budgets has halted. Resources across the board are being squeezed as businesses do their best to prepare for the unknown.
“Despite this, it is reassuring to see that investment in internet marketing is still growing. At times of uncertainty, the successful businesses are those that continue to nurture their presence in consumer’s hearts and minds, and as the world becomes increasingly digitalised, savvy marketers are prioritising internet marketing to reach a huge audience and protect their futures.
“The next step is to focus on efficiency – ensuring the most accurate and up to date data is used to inform strategies, and to understand, target, and ultimately engage the consumers that are going to bring the most benefit to the business. Technology choices will be crucial in ensuring marketing investments have the impact required when when no one really knows what is around the corner.”
Simon Thorne, UK Country Director, Flashtalking, said: “Sophisticated advertisers understand the long-term value in digital advertising as a key means to connect with their audience. While overall marketing budgets have not increased, these advertisers are shifting greater portions of their budget to digital advertising to drive higher ROI.”