Despite the gloomy financial climate, the latest IPA Bellwether report suggests a relatively promising outlook for the ad industry: in Q4 2023, marketing budgets saw their biggest growth since Q2 2014.
Just over a quarter of panelists saw total marketing budgets increase in the final quarter of last year, which is over double the number who registered cuts (11.3%). Among the sub-categories of marketing, events was the best-performing, generating a positive net balance of +15.9%. Direct marketing grew by 12.6%, while main media marketing saw an increase of 1.9%. Only two of the report’s seven categories saw a budget decrease: market research (-5%), and other (-6.4%).
Marketers showed a more bullish attitude towards growth prospects compared to the previous quarter, but difficulties linger. Paul Brainsfair, IPA’s director general, notes feedback reporting companies pricing their goods and services more competitively in an attempt to gain market share, indicating a tough trading environment.
What can we take away from these findings? And how should marketers proceed in the current climate? We asked some industry experts for their weigh in.
The latest figures paint an optimistic picture
The latest IPA Bellwether report provides an optimistic picture, with companies planning to increase investment in their brands as they ride out the current economic storm. However, one budget area that is predicted to decline is research, which may be a false economy, since marketing budget increases must be fully justified. Campaign measurement should therefore remain a key element in 2024 budgets, allowing companies to learn from their past activities and optimise for future success.
Anette Hallgren, chief customer officer, Brand Metrics
New options have brought about a wave of new audiences
The uptick in video advertising over the period is unsurprising with the growing popularity of both video-sharing social media platforms like TikTok and the introduction of ad-funded tiers to many popular streaming sites including Netflix and Amazon Prime. The introduction of these new, lower-priced options has brought a wave of new audiences, with Netflix reporting in November that they had hit 15 million users of the ad tier model.
As more and more consumers migrate from traditional broadcasting channels, big players like Amazon, Roku, and YouTube are set to make a fortune from the great migration of ad dollars from broadcast to streaming. But it’s still the biggest fish in the pond that will do best in CTV advertising, as they can offer their infrastructure to host the ongoing proliferation of FAST channels.
Hunter Terry, head of CTV, Lotame
Brands should harness AI to detect misinformation at scale
AI is viewed as a huge opportunity for the ad industry. With the demise of third-party cookies, we'll see increased investment in AI-powered, contextual targeting solutions, as brands seek new ways to reach consumers.
However, AI-generated misinformation is also an issue, creating brand safety concerns and wasted spend. Organisations therefore need to find solutions harnessing AI and human moderation; allowing them to accurately detect misinformation at scale and make the most of ad budgets.
Emma Lacey, SVP EMEA, Zefr
AI will help ensure marketing dollars are invested wisely
It’s no surprise that several firms intend to explore applying AI to their businesses in 2024. Adopting new AI tools to improve customer experiences and using predictive analysis to optimise budget allocation are areas in which we expect this trend to manifest.
Despite recession forecasts for the beginning of 2024, with boosts in total marketing budgets, applying AI will help ensure marketing dollars are invested wisely, focusing on confirmed consumer preferences over assumptions.
Leonard Newnham, chief data scientist, LoopMe
Brands still face a messy and complex media landscape
There’s a welcome sense of ‘Groundhog Day’ about the latest IPA Bellwether report. It says advertisers and agencies accept that global instability and a hobbled economy must remain as factors in their planning – and their optimism suggests that they are developing playbooks to help deal with both of these negative influences.
The report’s sense of increasing optimism is good news. However, even with consumer confidence increasing throughout 2024, brands still face an increasingly ‘messy’ and complex media landscape. There’s a growing, cookie-shaped hole in their customer data. Generative AI brings increased competition (as well as exciting opportunity). And public trust advertising – and in some traditional media – is not recovering.
Agencies play an important role in helping clients navigate these challenges. It’s crucial none of us loses focus on the task ahead in 2024, even if the medium-term outlook looks brighter.
Jem Lloyd-Williams, UK CEO, Mindshare
A major summer of sport will drive further demand for OOH
The IPA Bellwether report for Out of Home gives a different view than what we’re experiencing. In fact, it’s likely the sector robustly grew by +7.5% in 2023 and looks set to continue an upward trajectory of +6 to +7% this year.
This growth has been driven by Out of Home delivering more reach than any other commercial channel, making it one of the strongest for brand building and top-of-funnel objectives. This year we’ll see Out of Home vendors deliver further investment in new sites, especially in cities and other areas that are currently underserved. A major summer of sport will drive further demand. Combine this with the creative potential of continued developments in OOH aligned technology such as 3D and AR, as well as more contextual lower funnel opportunities through the real-time data driven activations provided by Advanced programmatic Digital Out of Home and we should be making the case for Out of Home to appear on almost every client multi-media plan.
Nicole Lonsdale, chief client officer, OOH division, Group M
In times of hardship, there is an increased focus on measuring the marketing mix
The latest Bellwether findings, which indicate that nearly 30% (net score) of companies are planning stronger budgets than in the previous financial year, should not come as a shock. It’s noted that during times of hardship, there is an increased focus on measuring the effectiveness and efficiency of all elements of the marketing mix. This has resulted in increased adoption of test & learn budgets, as well as techniques such as econometrics and Marketing Mix Modelling, which has provided clients with evidence of marketing as a force for growth and has illustrated the ROI it delivers. All essential information for business casing and budgeting.
This evidence, combined with an improved outlook for the year ahead, are clearly making a strong case for investment and growth.
Anthony Pey, head of marketing effectiveness, Medialab
Marketers will keep a close eye on ad impact to maximise media efficiency and increase outcomes
The longest unbroken budget growth streak since 2018 has marketers feeling confident that spending pots will increase, even if the economy is set for a shallow dip. However, strong conviction in continued expansion, won’t necessarily mean a freer hand on investment. Especially bullish optimism about individual company prospects suggests teams have faith in their own ability to ensure marketing activities drive robust ROI in 2024.
As they dial up their ad-spend, marketers will be looking closer at the impact ads make to outcomes in order to gather insights that will help maximise media efficiency to increase these outcomes. In the wake of cookie deprecation, much of that will involve incorporating attention metrics to current measurement approaches. By adding the attention dimension to existing data sets, advertisers will have a solid cookie-free way of increasing media efficiency and real opted-in audience optimisation, as opposed to relying on third-party tracking and often unreliable device-level data.
Alex Khan, EVP global partnerships, Amplified Intelligence
To sustain video growth the industry must focus on video-first, user-friendly ad placements
It's not all doom and gloom, quite the contrary - slightly over one quarter (26.0%) of panelists saw total marketing budgets rise in the fourth quarter of 2023, more than double the proportion registering cuts (11.3%). And just as exciting is that video also enjoyed a positive quarter, with the respective net balance coming in at +6.6%, up from +0.9% and the highest reading for three quarters. Video growth has now been recorded over three consecutive years, and to both sustain this (and drive effective, meaningful results) the industry must focus on video-first, user-friendly ad placements.
Holly McCann, Product Manager Creative, Picnic
Eagerness to explore new addressable media channels will grow
The surge in video budgets within the market is undeniably reflective of the overall buoyancy in the industry. However, it's crucial to acknowledge the noteworthy success of ad-supported streaming services in the last quarter, contributing significantly to this positive trend.
As we anticipate the loosening of restraints on marketing budgets in the upcoming year, we foresee a promising landscape for marketers. The willingness to explore new addressable media channels, particularly in the realm of Connected TV (CTV) and streaming, is expected to grow substantially. Additionally, the integration of AI-generated ad creative is poised to play a pivotal role in shaping the future of advertising.
Ryan Afshar, head of publishers and programmatic platforms, international, LG Ad Solutions