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IPA Bellwether: UK marketing budgets flat-line

Hopes of a sustained revival were extinguished in the second quarter of 2019 as firms reported no change to available marketing budget expenditure amid growing political and economic uncertainty.

Following a return to growth in the opening quarter of the year, buoyed by firms taking a more pro-active approach to offset risks to their businesses, latest Bellwether data signalled a stalling of growth, with the net balance falling from +8.7% to +0.0%.

The 20% of panel members reporting greater marketing spend was completely offset by those cutting expenditure, while the remaining 60% kept budgets unchanged since Q1.

Growing economic uncertainty, continued ambiguity over Brexit and additional risk through a change of political leadership in the UK were mentioned by firms as factors expected to challenge the business environment over the coming year.

This created hesitancy among clients and delayed decision making. Panel members also raised concerns that difficult conditions domestically were damaging consumer confidence and impacting consumption.

Businesses were also wary of headwinds from external sources, particularly spillover effects into UK markets from global trade disputes and weaker growth at key export destinations such as Europe and Asia.

Nevertheless, marketing executives were given extra discretion over internet-based advertising in the second quarter, as signalled by a net balance of +11.5% of firms reporting budget growth (+17.2% in Q1). Within internet, search/SEO budgets also grew solidly (net balance of +9.9% from +14.2%).

Main media advertising budgets were also given a boost in the second quarter, as some firms used big ticket marketing campaigns to build brand recognition and expand customer bases. There were also suggestions that marketing was being deployed as a defensive strategy due to increased competitive pressures. Overall, a net balance of +5.6% of companies reported greater main media marketing budgets (+5.2% in Q1).

The only other Bellwether category to register growth in the second quarter was events. The net balance increased to +4.8%, from +3.4% previously, its highest since the first quarter of 2018 and corroborating with forecasts made earlier in the year that events budgets would grow over the 2019/20 financial year.

Meanwhile, available market research spend was reduced for a sixteenth successive quarter (net balance of -2.9% from -4.2%), while PR budgets were also cut (net balance of -5.2% from +0.0%). A second successive downward revision to sales promotion budgets was also recorded (-7.1% from -3.7%). Aside from the ‘other’ advertising category (net balance of -12.8% from -5.4%), it was direct marketing which was the worst performer, with the net balance falling to -9.0% (-3.5% previously), the lowest level in over ten years.

Panel members remained negative regarding financial prospects in the second quarter, casting more downbeat assessments towards both industry-wide and company-own finances than seen during the opening quarter of 2019.

With precisely 34% of marketing executives reporting a pessimistic outlook towards finances in their industry, compared to approximately 8% that were optimistic, the resulting net balance (-25.6%) signalled the second-most negative assessment since the fourth quarter of 2011 (surpassed only by the Q4 2018 reading of -28.6%). Furthermore, this was down from a net balance of -22.6% seen in Q1.

Latest data also pointed to deeper negativity towards own-company financial prospects. The net balance fell to -9.8%, from -2.7% in the first quarter, signalling the highest degree of pessimism since Q4 2011.

Bellwether remains cautious towards 2019, expecting only a modest 1.1% annual increase in adspend over the year as a whole. Various factors underpin its reservation, namely ongoing Brexit uncertainty, but also recent developments in the UK economy, which this year so far have largely been negative. It cites there is a real possibility that the UK economy will contract in the second quarter, and the Bellwether panel comments, as well as latest Bellwether data, highlight that businesses are looking to contain costs and shield against challenging demand conditions.

Nevertheless, Bellwether believes businesses will be eager to accelerate marketing efforts once uncertainty has cleared, and subsequently see 2020 onwards being more positive on the adspend front. It expects growth of 1.8% in 2020, followed by stronger rates of increase in 2021 (2.0%), 2022 (2.2%) and 2023 (3.1%).

Image by rawpixel from Pixabay

UK ad spend to hit £21.8 billion in 2019, but growth slows

Advertising is on the up, with UK spend expected to increase to £21.8 billion, up from £20.5 billion in 2018.

That’s according to the latest forecasts by media investment group, GroupM, which predict 6.1 percent growth for 2019, down from 7.8 percent in 2018, with this year aided by decent underlying growth, admittedly with a slight decline.

Brexit still occupies management bandwidth, which in turn affects ad-budget setting with the potential to lead to reductions.

Digital advertising continues to grow at around 11 percent for 2019, accounting for more than 60 percent of total UK advertising, of which over half is search.

Digital media ‘pure plays’ represent the largest group of ad sellers, with Facebook and Google accounting for around three-quarters of the figure on a gross basis.

After hitting £4.5billion, television accounts for around 20 percent of media investment and remains a stable medium in terms of advertising, with spending left unchanged in 2018 over 2017, with levels set to remain for a 24 month period.

Radio also appears set to hold on to its revenue base this year, followed by closer to +2 percent growth next year, along with Out-of-Home (OOH), digital formats which are becoming increasingly important, accounting for half of spending in OOH during 2018, with further share gains still to come especially as more automation takes root, including the emergence of performance-based targeting and data-driven trading. For now, GroupM forecasts growth exceeding +3 percent in each of 2019 and 2020.

The losers in the advertising game continue to be print, with newspapers and magazines now accounting for less than 10 percent of media investment combined in 2019, down from more than 50 percent in a 15-year period.

Image by Falkenpost from Pixabay

Recession predicted for UK ad market in event of ‘no deal’ Brexit

UK ad spend will fall by nearly £1.4bn in 2019 in the event of a ‘no deal’ Brexit, according to latest predictions.

Enders Analysis says it will be the first time the country’s £23bn ad market has contracted in more than 10 years – down 3% to £22.54bn.

However, the firm also modelled a ‘deal’ scenario, in which the market would still grow in 2019 (up 2.7% to £23.9bn) but would still be down on 2018 growth (4.7%).

A no deal scenario, meanwhile, would see a stagnation in online display ad spend, which has seen robust growth over the last decade.

The last time the UK ad market contracted was in 2009, when it slumped 13% in the wake of the global financial crisis.

However, Enders has cautioned against brands rolling back ad spend too drastically:

“The advertiser response will be to become more tactical in allocating advertising spend, but evidence from the last recession suggests that ‘going dark’ with brand display spend can be a long-lasting mistake.”

China ad spend to surge in 2019, driven by digital

Dentsu Aegis Network has forecast advertising spend in China will rise by as much as 7% in 2019, driven by the middle classes’ purchasing habits and a greater amount of disposable income.

Digital’s ongoing growth within the market, up 15.8% in the first three quarters of the year to RMB 717bn, and digital out of home (OOH) increased 14.2% over the same period.

However, declines across traditional media recorded falls from newspapers (28%), magazines (9%), and television (5.5%).

At more than RMB 125bn, pharmaceutical companies led the way for ad spend. Fastest growing sectors include Entertainment and Web services. The largest decline, Real Estate, showed a drop of -34.93% drop year-on-year.

The forecast, part of a global ad report, predicts growth around the world will increase 3.8% in 2019 to reach a total of $625bn, with Asia Pacific and North America continuing to be the strongest growth market, contributing 42% and 30% respectively.

Western Europe will account for 15% of the global increase, along with Latin America (10%) and Central and Eastern Europe (4%).

“China’s digital economy continues to lead the globe, both in terms of scale and advancements made. It is therefore unsurprising that China remains a core driving force in the year ahead, with further positive growth forecast,” said Susana Tsui, group CEO, Dentsu Aegis Network China.

Tim Andree, global CEO & chairman of Dentsu Aegis Network, added: “As the world transitions to a digital economy, advertising is at the leading edge of change. Digital connectedness – driven not only by advances in technology, but the speed of consumer adoption – has fundamentally changed the shape of our business and will continue to do so. Even where digital penetration is highest – such as China and the UK – the trend shows little sign of slowing down.”

Marketers ‘must solve data fragmentation’ in 2019

Marketers need to reevaluate how they convert audiences throughout each stage of the purchasing journey, according to a new report.

Criteo surveyed 901 direct response marketers in partnership with Euromonitor International to better understand the challenges of converting customers in today’s digital ecosystem.

The results underscore how fragmented ad budgets have become as marketers look for results across so many different channels.

From paid display and social media marketing to content and SEO, marketers were asked where they spend their money and which channels are most effective.

Key findings include:

  • Conversion Metrics are Different Across Different Companies: Marketers have a lot of different ways of defining what makes effective conversion. New revenue (35%), new customer rate (33%), and cost per action (30%) proved to be most popular.
  • Data Availability and Quality Represent Key Challenges in the Conversion Phase: Nearly half (40%) of marketers struggle to find data on the online/offline shopper connection. This negatively impacts brand conversion given the prevalence of omnishopping. In addition, fragmented data makes it difficult for marketers to gain a true understanding of customers and to optimize future campaigns.
  • Reengagement Across Web and App Grows in Importance: Existing retailer customers spend more on average than new shoppers (51%) and shopping app customers have high loyalty tendencies (41%). Compelling discounts, personalization, innovative ad formats and engaging designs were reported to be three of the most successful tactics for reengagement campaigns.

The Criteo State of Ad Tech Report surveyed over 900 digital marketing managers and executives working in retailing, brands, travel companies, and other services companies with online sales channels.

“Marketers understand that conversion can happen at any point in the shopper journey,” said Jaysen Gillespie, Vice President, Head of Analytics & Insights, Criteo. “We found that fragmented data, tech giants, and personalization are all top-of-mind for marketers going into 2019.”

View the full findings at: https://www.criteo.com/wp-content/uploads/2018/12/StateOfAdTechReport_Global.pdf.

Mobile ad spend growth set to slow to 12% CAGR

The rapid growth in mobile advertising expenditure is set to slow significantly over the next five-years, according to Strategy Analytics.

After growing over six-fold between 2013 and 2018, growth in mobile advertising revenue will fall to a 12% CAGR and the market value will reach $222 billion in 2023.

In short, while the mobile share of digital advertising will grow rapidly in less developed advertising markets, in advanced markets the share over mobile is reaching a plateau.

Strategy Analytics expects mobile advertising to continue to suffer from headwinds including increased cautiousness following Facebooks Cambridge Analytica scandal and the implementation of GDPR.

Other key findings include:-

  • Mobile advertising will rise from to 67% in 2023. In markets where multi-device use is high, like the U.S., mobile advertising will account for just 58% of all digital in 2023, while in mobile-centric markets like India it will reach 71%.
  • Asia-Pacific is leading the mobile transition, representing around 44% of global mobile ad spend across the period. At a country-level and in terms of absolute ad spend, the U.S., and mobile-first markets China and Japan will remain leaders although their positions will erode.
  • Search will remain the dominant mobile advertising format with 47% of ad spend across the period while mobile video ad spend will be the fastest growing (+16.5% CAGR over 2018-2023) driven by the adoption of 6-second mid-rolls, and vertical ad formats by industry leaders Snapchat, Facebook and more recently YouTube.

Brice Longnos, Analyst Wireless Media at Strategy Analytics, said: “Growth of mobile advertising in developed markets, where the largest brands and advertisers can be found, is slowing down as mobile competes with other screens for eyeballs, such as connected televisions. Meanwhile, in emerging mobile-first markets, mobile phones may be the primary screen for content consumption but ad budgets are lower. Therefore, the contribution to global mobile ad spend from those markets will be marginal.

“Furthermore, the progression of programmatic in display and video advertising will make ad spend more cost-efficient, increasing impressions and engagement per dollar spent. These three factors explain why we see mobile advertising expenditures slowing from 2018 onwards.”

Nitesh Patel, Director Wireless Media, added: “With mobile accounting a dominant share of revenues for leading social networks Facebook, Snapchat and Twitter in Europe, the restrictions imposed on customer data collection will be particularly felt as advertisers and publishers figure out the best approach for delivering targeted advertising while complying with regulation. In the long run, we expect advertisers to benefit as consumers giving consent will be more receptive and engaged with ad experiences.”

Video now accounts for 25% of US digital ad spend

Services such as Facebook Watch have driven US digital video advertising to new heights in 2018, with spend increasing by almost 30 per cent to $27.8 billion.

The latest figures from eMarketer also indicate that video will make up 25 per cent of all digital ad spend for the year, with Facebook (including Instagram) taking 24.5 per cent of video spend at $6.8 billion.

Moreover, eMarketer says Facebook takes 87 per cent of all US video ad spending on social networks, having experienced particular success with in-feed video ads.

eMarketer principal analyst Debra Aho Williamson said Facebook will likely experience further success with in-stream video ads in Facebook Watch, which appear within the video player in the same way as TV commercials.

Perhaps most interestingly though, YouTube is well behind Facebook in terms of video ad spend, generating ‘just’ $3.4 billion in the US in 2018, up 17.1 percent from 2017.

Twitter is very much the poor relation, generating $633 million from video ads in 2018, while Snapchat will generate $397 million.

Online video viewing to exceed an hour a day this year

The average person will be spending 84 minutes a day watching videos online by 2020, according to the latest forecasts from Zenith.

In that year, China will have the keenest viewers, with the average person spending 105 minutes a day watching online video, followed by Russia (102 minutes) and the UK (101 minutes).

Zenith says this rapid rise in consumption is leading to a significant shift in the way brands plan campaigns across both television and online video.

The research covers 59 markets and encompasses all video content viewed over an internet connection, including broadcaster-owned platforms such as Hulu, ‘over-the-top’ subscription services like Netflix, video-sharing sites, e.g. YouTube, and videos viewed on social media.

Global online video consumption grew by 11 minutes a day in 2017, and we expect it to grow by an average of 9 minutes a day each year to 2020.

It accounts for almost all the growth in total internet use, and is growing faster than media consumption overall, so it is taking consumption time from traditional media.

Although some of this extra viewing is going to non-commercial platforms such as Amazon Prime and Netflix, Zenith says plenty of it is going to commercial platforms, so the supply of commercial audiences is rising rapidly.

In fact, the firm estimates that online video adspend grew 20% in 2017, to reach $27bn. Growth peaked at 36% in 2014 and has fallen steadily since then, but still remains high. It forecasts 19% growth in 2018, and an average of 17% annual growth to 2020, when online video adspend will reach $43bn.

Video’s share of online display advertising is rising steadily: it accounted for 27% of display adspend in 2017, and Zenith expects it to account for 30% in 2020.

Online video advertising is still only a fraction of the size of television advertising, but because television is stuck at 0% to 2% annual growth, this fraction is rising rapidly. The online video ad market was 10% of the size of the television ad market in 2015, and 14% in 2017. By 2020 Zenith expects online video adspend to be 23% of the size of television adspend.

“Online video is driving growth in global media consumption, as smartphones with high-speed data connections make high-quality video available to people on the move, and smart TV sets give viewers unparalleled choice in the living room,” said Jonathan Barnard, Zenith’s Head of Forecasting and Director of Global Intelligence. “The rapid rise in video viewing makes online video the world fastest-growing advertising format, creating new strategic and creative opportunities. Brands that do not currently have a strategy for online video need to think about getting one.”