Growing economic uncertainty may tempt advertisers into cutting corners when it comes to adhering to industry best practice. This would be a mistake.
According to the IAB’s latest Digital Adspend update with PwC, released last month, the digital ad market grew by 15% in the first half of 2022, with spend across the period totalling £12.52bn. This is the first sign that investment is returning to a more sustainable level following the pandemic, when spend slowed in 2020, before skyrocketing in 2021.
And yet, with the UK economy on the brink of recession, the cost-of-living crisis taking hold of disposable income, and talk of a 1970s-style return to energy blackouts, it would be hugely remiss to ignore the challenges that lie ahead for our industry. With this in mind, what’s the story that lies behind the latest Digital Adspend numbers? And do they reveal anything about what we should expect next?
Is this a stabilisation in spend?
It’s too soon to tell.
The 15% growth rate recorded in the first six months of 2022 marks a shift for the digital ad industry – a return to a rate of growth that is akin to pre-pandemic levels. To put it simply, 2020 and 2021 saw spend go haywire as the pandemic played out. In the first six months of 2020, growth dipped to -5% (only the second time on record that Digital Adspend has recorded negative market growth), before rebounding by a huge 55% year-on-year in H1 2021, which no one could have expected to be sustainable in the long-term.
A 15% growth rate feels comfortingly familiar in that the industry grew by 15% in both 2018 and 2019. But while the data does indicate a return to a more sustainable level of growth, it would be premature to think of this as a return to stability. Despite the fact that we have Christmas and the World Cup coming up, we know that digital advertising won’t be immune from the cost of living crisis as consumers and brands tighten their belts.
According to the World Federation of Advertisers and Ebiquity, a third of EMEA brands plan to cut their media budgets, more than in any other region. Meanwhile, the latest IPA Bellwether Report shows that total UK marketing budget growth slowed in Q3 for the second successive quarter. With digital making up 74% of all UK advertising expenditure, it feels inevitable that digital ad spend will be impacted by the economic challenges facing the UK.
The case for digital investment
Yet, despite this outlook, you don’t need me to tell you that continuing to invest in advertising and marketing throughout a recession – if possible – is really important. It’s a point Peter Field made very well at the start of the pandemic, with long-term effectiveness and defending your brands’ share of voice both cited as reasons for continued spend.
In this context, digital advertising has the benefit of being effective, efficient and agile – if it’s used in the right way. From podcasts to social to gaming, the diversification of digital means that it has the ability to drive growth across multiple channels – mixing direct response with the storytelling required for longer-term brand building. The relatively short lead times needed for digital activation allow brands to take a flexible approach during uncertain times.
However, ensuring that brands and agencies have access to the guidance that will help them to maximise the effectiveness of their digital spend is more important than ever. The IAB’s recent work with On Device Research maps the role digital plays at each stage of the path to purchase to understand how brands should be using digital channels across the advertising funnel.
Meanwhile, we know from a study with Lumen and IPSOS MORI that advertising in premium digital environments receives three times more attention than ads on functional task sites. It’s factors such as this that should be taken into account when deciding where spend should be invested, particularly when budgets are tight.
We can’t let standards slip
Most importantly, we need to continue to uphold shared standards within the digital ad industry and encourage advertisers to spend wisely.
Growing economic uncertainty might make it tempting to cut corners when it comes to adhering to industry best practice, such as the IAB’s Gold Standard. In my view, this would be a huge mistake. According to IAB Europe’s Pan-European Buyers Survey, 73% of advertisers say that they check if a media owner or supplier adheres to industry standards before spending budget with them. Doubling down on best practice makes even more business sense when budgets are under pressure.
The Gold Standard pulls together initiatives that address – among other things – ad fraud, brand safety risks, and supply-chain transparency. It’s important that brands know where their money is going at any time, but throw a recession into the mix and it makes it all the more vital. The more businesses that we can get involved with the Gold Standard, the better our industry is for everyone. Advertisers have a huge role to play in this by channelling investment towards certified suppliers – rewarding those that are upholding standards and encouraging others to do the same.
The fact that Gold Standard-certified companies continue to grow at more than twice the rate of non-certified companies – according to Digital Adspend 2021 data – indicates that many advertisers are acting on this, giving me confidence that the digital advertising sector will weather the challenges ahead.
If we can continue to ensure that responsible players are rewarded for their efforts with smart advertising investment, it’s the most powerful incentive to maintain the standards that underpin long-term growth.