Cautious optimism and careful strategy: IPA Bellwether Q4 2022

IPA’s quarterly Bellwether Report has once again taken the temperature of the ad industry. Up against difficult economic headwinds, Q4 2022’s results show an upbeat, yet understandably cautious attitude, as we begin 2023.

The report shows another quarter of marketing budget growth in Q4, with 20% of respondents upping the total marketing spend. This was the seventh successive quarter reporting positive growth, the longest sequence of consecutive growth for four years.

Paul Bainsfair, IPA Director General sees the results as encouraging: “It is particularly good to see positive revisions to main media budgets this quarter which is helping to drive the overall upward figure, fuelled particularly by investment in video advertising. As our evidence shows, this will stand brands in good stead during a downturn as brand-building advertising has a proven ability to maintain a brand’s pricing power and protect its profit margins."

The sector breakdown saw the highest upward budget revision to be in events and main media advertising. These sectors also led the way when looking at 2023/2024 budgets, with events spending plans up 18% and main media advertising spending plans up 13.4%.

The results seem generally positive for an industry that has suffered from its fair share of doom-mongering over the last few months. We asked a panel of experts their thoughts on the report, and what they’ve taken away from it as they look to 2023.

The winners of 2023 will be determined by privacy

With main media spending bouncing back, it’s important to focus on the growth drivers that will attract marketing investment in the coming year. The Q4 report continues to cite data-driven analytics and technological advancements, for instance, as the keys for unlocking stronger growth opportunities. 

This means the marketing industry must innovate its approach to data and prepare for a privacy-centric future without cookies or identifiers, for continued access to quality data needed for targeting and measurement. The winners of 2023 will be marketers that reach high value audience segments and demonstrate the impact of their budgets, while upholding consumer privacy.

Aviran Edery, SVP & GM, Marketplace at Verve Group

Raised budgets mean heightened expectations

After the doom and gloom of Q4 2022, all reports suggest that UK marketing teams are staying strong against the headwinds of a looming recession. While it’s promising that budgets are expanding, that doesn’t mean they’re free from scrutiny; we've been down this road (many times) before - during the pandemic and previous recessions - we know the goalposts will keep moving. 

As a result, we're seeing the biggest growth where teams can prove they are driving business results and they've already squeezed every efficiency from their existing platforms. Against a challenging economic outlook, a clear articulation of marketing's success will help to keep the board onside and unlock budget.

Sophie Wooller, Director of Digital Transformation, Croud

Leaders need to channel optimism into action

Andy Ashley

It’s reassuring to see that, even despite a technical recession, businesses are choosing to invest. Leaders need to channel this optimism for the year ahead to address another of 2023's major challenges: how to successfully target attention-grabbing creative within evolving compliance policies. 

The noose is tightening around the targeted ad model based on behavioural data, which has been popularised by Meta and Google – and with an expiration date on third-party cookies, the need for solutions that prioritise engagement and user experience, as well as privacy and optimisation, is critical.

Andy Ashley, Global Marketing Director, SmartFrame Technologies

Economic pressure should fuel efficiency

It's good to see the marketing industry taking the wisdom of Les Binet seriously: Don't cut your ad budgets in a downturn. But even if we duck a full-blown recession - and that’s a big if -  smart advertisers will want to use economic pressure to reduce wastage and improve efficiency. Properly evaluating the impact of ads, and then taking an axe to those that don’t get seen and can’t drive sales, is a good place to start.

Tanwa Edu, CSO, Lumen

Advertisers must adjust their perception of value

It’s a story as old as time: in a period of economic decline, advertisers must continue investing in their marketing strategies. The latest IPA Bellwether Report emphasises this, with firms expanding their marketing budgets to support brands. 

In the current economic landscape, value must translate to going above and beyond the transactional media investment. Therefore, advertisers must shift their focus from financial savings to delivering the best possible advertising to consumers, with minimal wastage. To maximise marketing budgets in 2023, the industry must harness innovative approaches to audience targeting, including eye-catching creative which is independently verified and measured.

Anna Forbes, UK Country Manager, Azerion

Brands should not underestimate empathising with customers

While the latest Bellwether Report makes for very positive reading, there is still the need for scrutiny. At times like this, agency partners must be able to adapt quickly to advise clients effectively while keeping an eye on future opportunities.

Customers will naturally gravitate to the brands that show understanding of their current challenges and offer solutions to navigate them. To do that you have to be present, seen, and relevant. In 2023, the brands that thrive will be the ones who optimise every element of the marketing mix to ensure no penny is wasted while also empathising with customers.

Chris Whitson, Global Head of Strategy, Iris

Realism must trump optimism

With the threat of prolonged recessions on the UK's horizon, this Bellwether Report may feel overly positive. We can assume that train strikes, bad weather, and rising inflation during Q4 2022 all impacted consumer trends, and this looks to have knocked OOH. No doubt, inflation also hit the cost of ads, causing brands to drive budgets up.

However there is room for positivity, as our industry is capable of enormous creativity, flexibility and resilience. The first step is to be realistic about the challenges ahead: as habits change, brands and agencies alike must be acutely aware of where to drive the best ROI.

Tom Laranjo, CEO of Total Media

Brands should not rest on familiarity

Proving the efficacy of marketing strategies will be critical in ensuring brands weather the immediate economic difficulty, to benefit from the promising signals for the end of the year.

It’s important for brands to avoid defaulting to methods because they’re considered familiar. Instead of a device-first approach, brands should embrace an audience-led omnichannel strategy including traditional channels, such as OOH, that deliver great outcome-based metrics

Sarah Parkes, CMO, Talon

Businesses will prioritise working smarter, not harder 

Increased budgets are a good first step but the industry needs to become more flexible with disbursing what is available and working with their partners to adjust in real time to get the most return on investment. 

One factor that marketers need to consider is the changing way audiences interact with advertising, in particular digital out-of-home advertising. Factors such as new working patterns, rail strikes or extreme weather (as seen recently) will all have an impact. Campaigns need to be adjusted accordingly to minimise ad spend wastage whilst maximising audience traffic - leading to a more efficient marketing budget overall.

Josh Partridge, Head of EMEA, Yahoo

Leveraging ‘people-based’ activation will prove a winner for brands

As the report highlights, online channels are taking up an increasing proportion of marketing budget allocation. Privacy-first, people-based marketing solutions, data clean rooms, and the expected growth of connected commerce media options, give brands more scope to marry their ad spend with addressable targeting, accountable and measurable results.

Brands that leverage ‘people-based’ activation and measurement solutions, which utilise privacy-compliant, first-party data to provide insight across all omnichannel marketing activities, will be those who can stay connected to their high value audiences and will see their market share increase.

Luke Fenney, VP Addressability, Europe, LiveRamp 

OOH will prevail despite report’s findings

OOH had a strong Q4 2022, buoyed by Christmas and the World Cup. Despite the challenges the public and advertisers are facing, data suggests the sector experienced low double-digit growth in the quarter.

In difficult economic times, brands are attracted to OOH’s traditional strengths such as trust, and mass reach. At the same time, long-term investment in digital screens and the technology behind them is enabling brands to explore new creative possibilities, delivering contextually relevant campaigns at scale. As a result, the sector grew 30% in 2022. In contrast to the IPA report, we’re forecasting growth to continue in 2023.

Nicole Lonsdale, Chief Client Officer, Kinetic UK

Now is the time for proactivity

Mateusz Jędrocha

Higher budgets, particularly for video, which increased 13.7%, are a great sign that brands are aware that they must spend smarter, rather than cutting the power off of their business engine. 

Ultimately, however, these findings demonstrate the importance of implementing effective and efficient marketing strategies, especially in the current climate. And by establishing flexible partnerships, using the right tools, and state-of-the-art technology, businesses will be able to make a real impact. To succeed in the months ahead, it’s never been more important to take a proactive approach and invest in the right tools and resources.

Mateusz Jędrocha, Head of Upper Funnel Solutions Development, RTB House

Strong marketer-publisher relationships paramount to maximise spend

It’s great to still see some growth in marketing budgets for 2023, given the economic difficulties we find ourselves in. However, marketers will need to seriously consider how and where to buy media to get the most out of any conservative budgets. Current reach on the open web is hindered as a vast majority of programmatic spend focuses on just 30% of consumers, due to users browsing in cookie-blocked or ad-blocked environments, and opt out of sharing data for advertising. 

To maximise ad spend responsibly, marketers must build relationships with publishers who can reach 100% of their users and provide advertisers with audiences built from rich, consented first-party data. This way marketers will achieve their goals without compromising their consumer’s privacy.

Ned Jones, Head of Advertiser Customer Success, Permutive

Advertisers have proven they can adapt against turmoil

Having already navigated previous periods of uncertainty and turmoil, advertisers have proven they can adapt and respond, while still managing to prioritise strong growth, and putting clients and customers first. 

The latest IPA figures are encouraging however this downturn may prove unusual in that recovery may be slow and prolonged. Continuing to work together forming strong partnerships will keep pushing brands forward.

Richard Kelly, Chief Revenue Officer, Mindshare