2022’s UK ad spend growth has been dulled by Omicron uncertainty but remains in a steep ascent, according to the IPA Bellwether report on Q4 2021. Marketers will have to make do with a “still-strong” 5.2% of ad spend growth (previously 6.2%).
Advertising budgets grew for three consecutive quarters in 2021. In Q4, a net balance of 6.1% of companies upwardly revised their total marketing budgets. This was half of Q3 growth, with Covid-19 Omicron spoiling many plans in leisure, travel and hospitality.
The Drum will headline the top figures from the questionnaire survey of around 300 UK-based companies. Following that is commentary from top figures in the ad industry speaking on their respective sectors.
Budget growth by category in Q4 2021
Market research enjoyed its strongest performance in nine years of tracking. Marketers were really keen to understand consumers and the business sphere during an inarguably disruptive time. These budgets were also heavily cut early into the pandemic.
Direct marketing was up (net) 3.8%, public relations (2%) and media advertising (3.1%). Within main media there’s video (7.3%) and other online advertising (4.5%).
Next come the cuts. Published brands (-5.9%), audio (-6.3%), out-of-home (OOH) (-8.3%), events (-3.9%) and other (-11.2%) were hurt. It’d be unwise to expect these levels throughout all of 2022, however. Q4 was uniquely impacted by the flare-up of a new Covid-19 strain.
Sales promotions budgets (0.0%) stagnated.
Where marketers will spend in 2022
The IPA predicts “significant” growth ahead. A net balance of 34.5% of IPA-surveyed companies say they will expand total marketing spend in 2022. Almost half (45.7%) expect budget growth. Just 11.2% expect spending cuts.
19% will increase events budgets. Sales promotions will soar 17.9%. Main media marketing (big campaigns on TV/radio) will go up 17.4%. Further growth is anticipated for direct marketing (+15.5%), other (10.6%), PR (9.6%) and market research (7.4%)
Between Q3 and Q4, panelists were asked about their financial optimism regarding their brand. It fell from 37.5% to just 7.6% – a sharp decline, but still a net majority of respondents were positive.
31% of respondents foresee financial improvements at their businesses, while 23% didn’t. Furthermore, 28% of companies were downbeat, more than offsetting the 24% who were confident. It was the first time the scale hit negative net since Q4 2020.
Growth will slow in 2023 and 2024, and forecast annual expansions of 1.8% and 0.9% respectively. Inflation, rising tax and the fact the growth is fueled by a return to pre-pandemic levels is to blame.
Paul Bainsfair, IPA director-general, summarized: “Going forward, new variants – alongside supply chain issues and heightened inflation – may indeed induce further wobbles. The key for businesses to weather these fluctuations will be, where possible, to invest in the longer-term and in brand-building media.”
The industry reacts
The Drum vox popped a spectrum of marketers from across the industry to gauge their reactions to the news.
David Fletcher, chief data officer, Wavemaker UK, on the return of research spend.
“It’s not before time for research but also full of new opportunities. Advertisers may well have felt that there’s enough in the immediate return paths facilitated by digital footprints not to need as much research to keep a handle on current performance. But the myriad changes in behavior – from mainstream on-demand access to last-mile delivery businesses and the emerging challenges and opportunities of virtual technologies – combine in a need for deep and real insight to help advertisers navigate long-term strategies.”
Louise Ainsworth, chief executive officer EMEA, Kantar’s Media division, on the tightening consumer purse.
"There is a real battle to capture spend as they navigate a potent mix of changing consumer behavior and rising inflation putting pressure on household budgets. People’s routines will adapt again as the nation heads back to the office from next week. What old habits will consumers embrace? What pre-pandemic luxuries have they learned to do without or can’t justify the cost of anymore? It’s absolutely crucial to understand people’s new essentials and what they’re willing to carve out disposable income for in this time of flux."
Tom Laranjo, managing director of Total Media, is similarly worried about the coming crunch.
"Households need to deal with the fastest increase in the cost for living in more than 30 years. Data from the Bank of England shows that net borrowing rose in November 2021 to the highest level since July 2020 in response to this, a possible clue that consumer confidence will continue to remain low. Alongside supply-side issues, the UK recovery in 2022 will depend on whether consumers feel confident to spend or feel they need to hold on to savings to insulate themselves."
Alistair MacCallum, chief executive officer, Kinetic, looks to the recovery of the great outdoors.
“Despite IPA’s Q4 forecast revealing budget cuts to OOH, the sector has weathered an unprecedented storm and is now returning to growth as talk turns to phasing out all UK Covid restrictions in the near future. We actually experienced a very strong Q4 across our clients and agencies in terms of revenue.” [It might be a case of fewer clients spending more money or report findings simply not matching Kinetic’s business realities in this instance.]
Richard Williams, commercial director at A Million Ads, points out audio advertising is getting more sophisticated.
“Dynamic audio allows brands to tap into contextual data points such as time of day, weather or the listener’s personal preferences. For instance, during holidays such as Valentine’s Day a brand might want to drive people to their stores by suggesting gift ideas, whereas at Easter a supermarket might want to promote chocolate for an Easter Egg hunt. Relevancy helps avoid ad fatigue.
Teodora Gavrilut, chief operating officer at Creatopy believes the data points to more brand building.
"We are coming to a maturation phase, where advertisers are now taking the time to look at their budget allocation in the long term rather than always looking at short-term results. It means we should expect to see advertisers invest their budget into brand-building as much as performance."
Michele Szabocsik, vice president of marketing for BlueConic, highlights the need for agility.
“The emergence of the Omicron variant, rising inflation, and supply-chain disruption are emphatic reminders of the world’s unpredictability. Having teams and tools that allow for flexibility and speed in response to market changes can mean the difference between whether a business thrives, or simply survives.
The e-commerce race continues according to Liam Patterson, founder, and chief executive of Bidnamic.
"We’ve felt a real urgency from clients both existing and new - mostly SME online retailers - who realize just how vital it is to gain the edge over fierce competition by fully optimizing online channels like Google Shopping to future-proof continued growth. We absolutely expect this to continue to increase and with more and more brands jockeying for their share of eyeballs
Jacque Chadwick, commercial trading director, The Ozone Project, on publisher fortunes.
“I reckon many in our sector have fared better than initially expected at the beginning of the pandemic. Considering this period has coincided with major events in digital advertising (think third-party cookie deprecation, privacy and transparency concerns), my thinking – led by client conversations – is that many have used this time to assess the how, where, and why of their media investments. I believe the smart advertisers and agencies will be more focused than ever on ensuring their digital campaigns run in quality, effective and brand-safe channels – allowing that budget growth to translate to even better outcomes.”
Faye Daffarn, UK MD at Tug questions how the spend will look arguing that brands need to make good on their sustainability promises.
"We expect agencies to start working more closely with clients to develop lower-carbon media plans, as well as encourage them to use the power of advertising to promote sustainable consumer choices and behaviors."
Similarly, in the publishing space, Duncan Chater, head of sales Europe, Bloomberg Media anticipates more ESG spend from brands.
"We expect greater advertising spend from organizations seeking to authentically demonstrate their commitments in this space."
Matt Andrew, managing director, data science consultancy, Ekimetrics, acknowledges that budgets have had to be more flexible than ever.
“The burden of an annual plan must become a thing of the past. The last two years have tested marketers’ ability to respond quickly to changes. Brands must invest in forecasting, scenario planning and analytical frameworks to make sure they are better protected and more able to adjust as needed, whether that’s to the ongoing impact of hybrid working on OOH advertising, global market disparities or the technological changes in digital advertising.”
Richard Kelly, chief revenue officer, Mindshare UK, reminds us there are some big spending moments to come in 2022.
“With restrictions now set to be lifted, we can look forward to opportunities generated by pent-up demand and an exciting year with huge events such as the Queen’s Platinum Jubilee and the men’s football World Cup.”
Alison Harding, vice president of data solutions EMEA at Lotame is worried marketers are not ready for the big 3PC turn-off and coming privacy regulation.
"As an industry, we need to be more bullish on proactive testing of privacy-first identity solutions to support the value exchange of the open web and the livelihood of independent publishers. Many are overloaded with identity choices and still unsure how to determine which ones work best for them. Scale remains a persistent elephant in the room too."
In the TV space, Stefanie Briec, director of demand sales at Freewheel anticipates big moves in CTV.
"We’ll likely see strong movement in the industry to unify video advertising through advanced data, supply, and measurement capabilities. Marketers seem to be looking to seize video’s full potential and use it seamlessly across mediums."
And Emil Bielski, UK MD at Croud is worried, all of these predictions required talent to operate, and it's assumed there will be a shortage.
"Everyone has been through a permanent lifestyle change; not only reflected by changing consumer behaviors but also shifting staff behaviors. Our industry as a whole must embrace flexibility across the board - that way we’ll be able to cater to the needs of our clients most effectively."