Interviews, insight & analysis on digital media & marketing

Reaction: Ad spend recovery not expected until 2022 as year spend forecast down by £3.9bn

The recovery of advertising spend from the impact of Covid-19 is unlikely until 2022, with a forecasted decrease by £724m year-on-year for the fourth quarter in the run up to Christmas alone.

As the global pandemic continues to impact economies all around the world, the latest Advertising Association/Warc Expenditure Report has dialled back its prediction of a recovery of 16.6% growth for next year, which it forecast in July, to 14.4%. It has also revealed that spend for the year will decrease by 14.5% to £21.5bn, down £3.6bn on 2019.

Meanwhile, the all-important Golden Quarter leading up to the Christmas period will drop by 10.5% to £6.2bn on the previous year.

All advertising media has been impacted with cinema and out-of-home expected to continue to be the hardest hit in Q4 with a decrease of -66.1% and -19.6% year-on-year.

The report also revealed that the second quarter 0f this year, expected to be the hardest hit period when the initial stages of the pandemic spread resulting in a prolonged lockdown across the UK, meant that advertising spend fell by just over a third (33.8%) for the period, the worst quarter ever recorded for the industry. As a result, the first half of the year recorded a loss of £2bn year-on-year, down by 14.9% on the same period.

The results have been described by the Advertising Association’s chief executive as “stark” while highlighting a lack of a ‘straight-forward recovery’ due to the virus spreading at varying rates within different parts of the UK.

“We must boost growth and support jobs through an advertising tax credit and a skills programme to aid colleagues facing unemployment. It is essential that our workforce, business, and Government work together on the recovery plan for our industry and our country,” stated Woodford, offering his suggestions to kickstart economic growth.

Speaking on the need for brands and marketers to adapt by working differently, Patrick Johnson, global chief executive of Hybrid Theory, the digital services partner for agencies and brands, said that due to the sudden escalation of digital transformation, for many companies the coming two years would be key for the fortunes of many.

“Brands who evolve with the opportunity will grow and come out stronger while there will be businesses at the danger of cease to exist.  Especially now, as we’re moving into a key time of year for all businesses; as the holidays approach, marketeers will have to reimagine their traditional tactics across the festive period and find smart ways to engage audiences.”

He added that with new behaviours set to emerge, marketers would need to prepare to learn and adapt in order to their communications strategies to be relevant and effective.

Meanwhile, Craig Tuck, chief revenue officer for The Ozone Project was unsurprised by the forecasted downward trend in advertising spend and the demand that the acceleration of change has placed on advertisers, both as a result of the virus and by industry trends.

“This is particularly the case in digital where we’ve seen major challenges like programmatic supply chain transparency and how to navigate a cookieless future come even more to the fore. The result is advertisers taking a more considered and conscious approach to their media placements, to ensure they deliver the right outcomes in the right types of environments.”

Tuck added his view that by focusing on solving the problems being presented to advertising, a more optimistic 2021 was possible.

Anthony Botibol, VP of Marketing at omnichannel marketing hub BlueVenn, offered a similar view that despite a slower recovery being forecast, marketers can still achieve stable growth for next year, especially if they focus on building loyalty within their existing customers.

“Businesses need to be more thoughtful and look inside their existing customer base to see which loyal groups they can engage and serve better. Part of this will mean collecting and collating data across multiple owned channels,” he continued to propose, citing data from the company’s own research showed that those who are unifying their data had grown by 16%.

“Those businesses that do unify data are, in fact, more than twice as likely to achieve their business goals and see a return on their investment compared to peers that do not. The reason for this, particularly for high-street brands, is that they can start to identify how each customer moves from offline to online and back again and target them accordingly with the most relevant offers. Without this ability, many brands are flying blind. An organisation’s customer base and the data it holds is unique, so finding new ways to up-sell and cross-sell amongst existing customers will be crucial in helping marketers to mitigate the lost revenue from a reduced pool of new customers.”

The AA/Warc research did predict a strong increase for cinema ad spend (138.3%) should theatres reopen fully, while delayed filmed such as James Bond’s No Time To Die and Ghostbusters: Afterlife are finally released. While out of home would grow by 57.1% and magazines by 18.8%.