UK digital ad budgets rise at record rate finds IPA Bellwether, but marketers warn of 'short-termism'

Digital ad spend budgets increased by their biggest margin in a decade

The Institute Practitioners in Advertising's (IPA) latest Bellwether report has shown UK marketers’ digital budgets have increased at their highest rate in a decade, despite the ‘Google-boycott’ and harsh words from P&G’s top marketer earlier this year.

The Q2 survey showed that around a third (32%) of those surveyed recorded an increase in their internet marketing budgets, the highest level recorded by the survey since Q3 2007. The substantial growth not only continued eight years of continuous expansion in internet budgets but helped drive overall marketing budgets.

The findings follow a tumultuous period of uncertainty within the digital advertising space which saw many advertisers including the UK government, McDonald's and Marks & Spencer suspend campaigns on YouTube and Google's Display Network in response to concerns over brand safety and transparency.

This coincided with P&G's top marketer Marc Pritchard issuing a rallying call for "the murky" online media supply chain and measurement metrics to be cleaned up.

During this time broadcasters such as Channel 4 saw a temporary jump in ad spend as marketers turned to traditional advertising models which promised more safety. The migration was short lived however with the broadcaster’s sales director Jonathan Allan admitted earlier this month that advertisers have “gone back [to YouTube] to some degree”.

The IPA reported that wider economic uncertainty caused by the outcome of the general election and the unknown effects of Brexit negotiations have meant that marketers on tighter budgets are seeing greater value from digital and are shifting spend accordingly, despite these well-publicised issues around ad fraud, brand safety, and viewability.

“The election result has thrown further uncertainty into an already volatile environment,” said IPA director general Paul Bainsfair. “It is inevitable that this has had a knock-on effect on UK. Specifically, for marketers this has meant a desire, where possible, to seek out more activation driven advertising. As evidenced strongly in this latest Bellwether Report, this has resulted in a further move towards advertising in the digital space.”

Over 26% of the panel recorded a lower level of optimism compared to three months ago when considering the financial prospects for their industry, resulting in a net balance of -12.6% compared to -5.7% in Q1 2017, the second lowest reading in four and-a-half years.

As such, Phil Stelter, managing director at digtital agency Syzygy, adopted a cautious summary of the growth in digital investment, warning that it should not be taken as a sign of long-term health of the industry.

“It’s easy to naively assume that growing online ad spend is a sign that the industry is in rude health, but we’ve seen this before. When we as an industry can’t be sure of a rosy environment – and it’s been a rough few months for the UK – marketers spend more on shorter-term solutions with more dependable results.”

He added: “Search remains the main answer in unsteady times, with its immediate and efficient pull. It delivers on short-term sales, has a tactical impact and a far more tangible ROI than more traditional channels.”

Sue Todd, chief executive of Magnetic, echoed these sentiments, saying the latest findings are indicative of the increase in short-termism that has infiltrated businesses over the past few years.

“A recent report carried out by Magnetic and Enders Analysis reveals a shift away from a 40:60 direct response/brand display split in marketing expenditure, to a 50:50 one. This is being driven in part by companies under pressure to deliver to shareholders, with as many as 80% of CEOs saying they would decline to make an investment to fuel innovation if it meant missing one quarter of earnings results.”

It's a ratio change that the IPA’s Bainsfair warned against in the latest report, reminding marketers that IPA studies have consistently shown that the most effective marketing results from a 60:40 brand building (emotional) to sales activation (rational) ratio.

Aside from marketers seeking short-term results from squeezed budgets, Celine Saturnino, chief commercial officer at Total Media, said the simple fact remains that consumer's are spending more time online and on mobile.

"Investment typically follows this behaviour and unfortunately in some cases, to the detriment of other channels that often better support long term brand development and memorability," she said.

Greg Grimmer, Fetch’s chief operating officer added: "Advertising is always an ‘easy’ discretionary cost to cut but marketers and the advertising industry have to continue to prove the danger of this short term approach. We need to focus on creating campaigns that drive the imperative business results demanded, while keeping brand health front of mind.”

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