Why the 2023 economy won’t spark a race to the bottom on media

While most marketers are of a consensus that it is vital their budgets must be protected to “not only retain a share in the bad times but also shot out of the blocks when the good times returned”, the report adds more “nuance” to the discussion

What made 2009 unique

The whitepaper claims that the global financial crisis was a catalyst for brands generating cost-savings in their media. “Over the subsequent decade, we saw a negative trend for overly commoditized media, a race-to-the-bottom dynamic and a client-side addiction to cheaper and cheaper media prices.”

In short, marketers have been unlearning the bad habits they may have picked up during the last recession. What unites the years, is that the five big networks were still talking about the fragmentation of the media ecosystem. They were dealing with more channels than ever before and yet, it was way less than they now do.

“With declining budgets stretched over an ever-expanding range of channels, many advertisers struggled to achieve the desired cut through or generate a return on their media investments.”

These five groups accounted for around 85% of the global media market, they were bigger than the brands they were buying for and could negotiate discounts. For many brands, media was the biggest expenditure and therefore first on the chopping block.

The report says: “Corporate leadership teams, encouraged by finance departments, created a new language around media budgets. These became ‘costs’ that needed to be managed (down).” Those administering the spend also saw cuts in 2009, a good many brands cast away their in-house teams. Some were usurped by procurement teams with little experience in marketing or media “where the only thing that mattered was the cheapest price”.

Agency fees (usually around 10%-15% of spend) were seen as ripe for cuts, during the media tendering processes. This forced agencies to “find other ways of making money from the remaining 90% of the budget”.

That resulted in the ‘MediaPalooza’ of 2015 when roughly 15% of the world's largest advertisers (combined billing of more than $30bn) all tendered their media accounts in what’s been branded since as a “race to the bottom” price. “The end result was a toxic period of media malpractice and opaque trading practices, in which hidden rebates and agency value pots, as well as mistrust and transparency issues, tarnished our industry.”

P&G's Marc Pritchard addressed this in 2017: ‘’We have a media supply chain that is murky at best and fraudulent at worst.”

How 2023 is different

During the decade of cost-savings, programmatic buying grew to encompass almost all of the trillion-dollar global media marketplace. From the open web, this method of buying has spilled across TV, audio, OOH and more. To link up all that data and drive efficiencies, investments have to be made.

Big agencies have a reduced hold on this more democratized ecosystem although they will still have “access to (non-auction based) pricing efficiencies and some exclusive first-look media opportunities”. Hidden discounts are reportedly harder to secure due to increased transparency in the media supply chain that Pritchard rallied for in 2017.

• Isba audit sees publishers grow programmatic ad spend share 8%

• Publishers praise programmatic progress, but now urge scrutiny of the long tail

It adds: “The new reality is that data-fuelled insight and strategy, rather than scale, are now the dividing lines between success and failure. Intelligence rather than brute strength is critical in ensuring brands buy the right inventory at the right price and right time.”

There’s already been belt-tightening in marketing budgets. ID Comms believes this will accelerate the trend for advertisers to take greater control of their media decision-making. In the last recession, it believes brands “relinquished” that control with cuts in budget and jobs instead.

Here are some more 2023 insights.

• Recently, most marketing-led companies have bulked up inhouse media management, data analysis, strategy and sometimes programmatic capabilities.

• Media is again seen as a clear driver of business growth.

• Many advertisers have conducted forensic studies of their internal media operating structures.

• Procurement experts are now leading the charge to secure full transparency in data ownership and privacy in adtech.

• Marketing procurement is now more likely to work alongside marketing in agency selection.

• Brands have more control of contracts, from a tech and agency partner perspective as well as a direct relationship with third-party suppliers.

• Price will still remain a consideration but the focus is on media efficiency.

• The big opportunity is around reducing waste.

• Agency partners remain important but no longer control everything.

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