How Might Market Recessionary Pressures Impact Advertiser Strategy On Marketing Budgets In 2023
As appeared on The Brand berries on 05 December 2022, read here.
In October this year, we at Ebiquity/FirmDecisions and the World Federation of Advertisers (WFA) conducted a flash survey on the potential influence of recessionary market conditions on 2023 advertisers’ media budget decisions. The study covered 5 of the top 10 advertisers globally, and 16 of the top 50 with a total ad spend of $40BN between them.
29.3% said they would decrease their 2023 budgets, with 48.8% saying they would reduce their offline budget however, 42% said they would increase their online media budget, the largest share of this increase going to Connected TV.
A recent study of 59 UK advertisers conducted by Ebiquity and the Incorporated Society of British of Advertisers (ISBA; UK advertising trade body) backs up these findings, with 40% stating they intend to cut offline spending, with the deepest cuts being broadcast TV.
According to the latest study by the Internet Advertising Bureau (IAB) in the US, 63% of respondents said they are evaluating and forecasting more frequently, and 45% are doing it on a monthly basis. So, when economies falter, marketers don’t necessarily cut budgets, but they do rationalize their marketing investments and may look to improve efficiencies in broadly 2 ways:
- Media performance
Besides rationalising spend and conducting media effectiveness assessments of their agencies’ media buying capabilities in planning, active campaign management, benchmarking rates, and improving overall media performance metrics, amongst others; two media performance areas we expect to attract increasing advertiser attention going into 2023 are:
- Direct and Private Market Place deals within digital spend
Pursuit of direct or private marketplace deals. We have seen in 2022 a growing recognition from advertisers that, if they can afford it, they pursue more direct to publisher deals or, in the case of programmatic, pursue private marketplace or programmatic guaranteed deals. This also enables advertisers to utilise those publisher’s first-party data to target more effectively. Notably in both direct deals and private marketplace buying, it limits the ad fraud experienced in the programmatic open marketplace ecosystem, such as ads appearing on fake sites or not viewable which is expected to cost up to $50BN/Year by 2025. Indeed, in the case of direct deals, advertisers can avoid the estimated 40% of every dollar paid to the digital media buying intermediaries in tech fees that erode buying power. The increasingly complex media landscape compounds the media ecosystem in MENA. With 50% of media spend now going towards digital media buying and 60% of that being spent programmatically, this area has become a key area of concern for advertisers.
- Responsible media buying
As with other aspects of ESG strategy, Advertisers are extending this to the media they purchase. According to eMarketer and Marketing Dive, 84% of consumers would be more likely to buy from a company that practices sustainable advertising, and 60% of marketers are willing to downgrade or drop media that fail to meet their standards even if the site providers deliver on performance metrics. Marketers are beginning to act on poor practices from partners, platforms, and publishers, with the concerns focused on four primary areas:
- Funding disinformation sites or hate speech sites, such as denying climate change or advertising on covid conspiracy sites.
- Publisher diversity and inclusion: Just like any other business the media supply chain needs to be held to the same standards.
- Privacy and data protection and how publishers store, protect and use data. 32% of 3rd party marketing cookies are loaded before user consent has even been given.
- Made for advertising sites – avoiding advertising on sites that pursue aggressive monetisation strategies and crowd the screen with low-quality content. Roughly 15% of ad spending went to these sites, according to Ebiquity/Scope3 study and contributed to the high carbon footprint of the digital advertising industry.
From the 2022 study undertaken by Ebiquity analysing over $1BN in programmatic ad spend, Advertisers are unknowingly and inadvertently working with platforms that do not meet their expected standards, and we therefore expect action to grow significantly in this area in 2023.
- Auditing key agency partners
There is continued and growing recognition by Middle East and Africa advertisers going into 2023 of the need to audit their key strategic agency partners.
We often observe advertisers spending considerable time negotiating their agency contracts and sometimes hiring cost consultants to help them. Some advertisers understandably assume that once a contract is signed, both parties adhere to the contract precisely for the duration of the 2–3-year term, and there is no need to check if commissions are accurately calculated, verify media that actually runs and that credits/rebates are paid back in full, amongst others.
However, with an increasingly complex media ecosystem, advertisers in the region find this is rarely the case, and there are always deviations that can cost millions of dirhams in waste through misunderstandings, etc.
Auditing ensures effective stewardship of where money is really spent, identifies areas of non-compliance to the contract terms, and leads to optimising the money advertisers pay their agencies and maximising all possible rebates and discounts available. It also builds stronger advertiser-agency partnerships by identifying contractual misunderstandings and making essential changes to ways of working and KPIs, as scope rarely remains the same through the life of the contract.
There is considerable time spent finding agency partners and negotiating efficient terms of a contract which should be enforced through an audit.
2023 will cause advertisers to make difficult choices and force closer scrutiny not just on the value-for-money of their marketing investments with their agencies, but also extend to ensure corporate values are upheld in the marketing supply chain.
