It’s less than a month until Christmas, which means it’s that time of year when we start looking towards the industry trends and forces which will shape the year ahead.
This year has proven that even the best judged predictions can be foiled by unforeseeable events. But nonetheless, it’s still worth surveying the industry landscape to try to predict the changes we’ll see over the next twelve months (barring any more pandemic-sized disruption).
This year VAN is starting by asking the industry’s analysts – those tasked with understanding the lay of the land to help us understand the dynamics driving change. Here are the analysts’ predictions for 2021.
2021 will almost certainly be a good year for advertising, if only by comparison with the uniquely awful 2020. It’s not just that there will be a rebound from the pandemic. While the pandemic did a lot of damage to individuals and the global economies they inhabit, it also did a lot to establish new plateaus against which future growth will occur. Consequently, marketers will be pursuing new commercial models with zeal, aggressively investing in e-commerce and other digital activities to capitalize on consumers’ willingness to engage differently than they did in the pre-pandemic era.
Marketers will also have to deal with the continuing disinvestment in traditional ad-supported television which coincides with accelerated investment in ad-free television by many of the world’s largest owners of TV networks. As consumer viewing patterns mirror these changes, marketers will face accelerating challenges in managing reach-and-frequency-based media goals. Paradoxically, scarcity will lead to pricing pressure, as measured on a like-for-like basis. This presents opportunity for new tools and processes to better manage overall budgets, but it also highlights the ongoing importance of looking for alternatives to traditional media channels.
More generally, marketers will benefit from accelerated investments in understanding how consumer behaviours and preferences are evolving, tying those insights into product and distribution choices and further investing in all of the elements that support efforts to build their brands.
A lot of the issues that have faced the publishing industry this year look set to continue next year, we don’t have a path back to normality yet. The macroeconomic position of the country is still going to strongly affect advertising, as well as consumer behaviour.
One of the big themes that I think will come into next year is M&A and consolidation. A lot of the traditional, legacy players are ripe to be picked, and I expect we’ll see more transactions. And then from a news perspective, that opens up a number of doors around regulation and competition policy. There are very specific aspects of competition law which relate to newspapers, and which prevent certain mergers from happening. Next year we might see cases where a newspaper is either acquired by a larger group, or closes down. And if competition law blocks those acquisitions and the smaller groups close down, then you get ‘news deserts’ of areas not served by local newspapers.
It will also be interesting to see what happens with Google News Showcase. I think it’s a very positive step in the right direction for Google. There’s a very forensic lens on the tech platforms and their dealings with newspapers, and these sorts of deals are a way to deal with that – it’s not the be all and end all, but its definitely progress.
And then we’ll also see a continuation of publishers experimenting with new revenue models. Pretty much every major news publisher in the UK is now experimenting with some kind of reader payment model, and that’s one of the big trends which has really been accelerated by the pandemic. We’re seeing large numbers of people starting to pay for online news, and there’s a huge appetite out there for quality news. But the shortfalls of online advertising have been particularly exposed this year, so an evolution of models away from an advertising dependency feels like it’s in motion.
The last few weeks have seen an uptick in optimism as positive news regarding Covid-19 vaccine treatments have broken. So, let me start with what is likely to be a consensual view, namely that advertising is likely to rebound sharply in 2021. In fact, in the TV market for example, there are already some signs this is occurring. However, it won’t be a return to normality.
Firstly, the pandemic is likely to have far more reaching structural impacts on media than the 2008/9 recession. The latter accelerated the declines in print, the growth of digital and the transfer of share to market leaders. This crisis is likely to do the same also. However, it has fundamentally uprooted a number of industries important for advertising (e.g. High Street Retail) while turbocharging others (e.g. D2C). It is likely then we will see the Sorrell-esque “K-shaped” recovery where some firms see a rapid bounce-back whilst others decline.
Secondly, there has been a significant shift in the structural cost bases of many companies. Travel and entertainment is likely to be permanently impacted (or at least over the medium-term), with property likely to be the same. Some advertisers are using the savings to reinvest in advertising e.g. Mondelez and expect more of this – especially from FMCG brands – as the rise in eCommerce raises concerns of brands being squeezed out by supermarkets.
Thirdly, there will be some surprising winners – and losers – from the bounce-back. It’s early days, but television advertising looks to be a winner, with growth returning in Q4. One argument is that the lockdown has convinced the decision makers in the Agencies and amongst advertisers that television is still vital to reach consumers. Out-of-home is also likely to benefit from digital growth. However, some of the online platforms may be surprising losers. There are already signs of a wide divergence between “must have” digital platforms (e.g. Snap) and weaker properties (e.g. Spotify advertising). One question is whether there will be a significant shift out of search, which was nearly one third of the UK advertising market in 2019.
Finally, there is the consumer. The positive argument is that people have benefited from less spending and reducing debt, and so have money to spend (one way to look at the lockdown is that there has been a massive transfer of wealth from the government to the private sector via furlough and support schemes, loans etc.). However, there is a counter argument that states that households may be unwilling to spend because of uncertainty, in particularly jobs given that many companies have used the pandemic to push through secular changes such as delayering of management teams, more flexible working (i.e. where the employees agrees to flex their hours to the employers’ business) and pay / hiring freezes. This last point may be the most relevant of all.
Digital advertisers took for granted for many years their ability to target and track device users without asking for their consent. That’s changing now due to a combination of government regulation and pseudo-regulation from device- and browser-makers like Apple and Google, and marketers and publishers alike will spend much of 2021 putting together a new playbook for identifying users and targeting and measuring ads—and that playbook will have to include a chapter on getting consumers on board.
Many in the industry are positioning this an opportunity to (finally) educate consumers about the importance of targeted advertising to their internet experiences, genuinely convince them to consent to sharing their information for that purpose, and enjoy a result where willing consumers volunteer accurate data in order to receive useful and relevant marketing messages.
Years of consumer polling suggest this will be an uphill battle. In one recent result, 57 percent of US internet users said in a survey conducted by Nielsen and The Conference Board that they would rather keep their data to themselves and forgo personalized content and ads. This is a marketing challenge, and 2021 is the year when brands, publishers, and their partners must solve it—or see ever more digital advertising controlled by a handful of walled gardens.
The year 2020 has unsurprisingly seen a shake up within the advertising world. As the global economy dipped into recession, advertising budgets were one of the first to get cut. But 2020 could be a watershed year for digital advertising. A variety of lockdowns and travel restrictions forced consumers across all demographics to accelerate their transition to online and streaming media.
One of the biggest winners was Amazon—which benefitted from the reliance on online shopping during the pandemic and leveraged this to grow its advertising platform. Search and social giants Google and Facebook proved resilient in the face of the pandemic thanks to an influx of direct-to-consumer marketers. The flipside is that the resiliency and consumer reliance on these social and streaming giants has put them under increased scrutiny of multiple governments, which will lead to greater regulation of digital services in 2021 and beyond.
But traditional advertisers are not doomed. Although some media such as radio or cinema advertising may never recover to pre-pandemic levels due to shifts in consumer habits, broadcasters offering TV advertising are in a great position to capitalize on the digital video boom. Household penetration of broadband has continued to grow, and consumers still enjoy watching content produced by TV channels. This enables new digital technologies such as addressable TV advertising or Broadcaster Video on Demand (BVoD) services to grow, and better monetize viewers thanks to new levels of personalisation that were previously unavailable. However, until a COVID-19 vaccine is fully developed and distributed, advertisers will have to remain vigilant and keep up with a continuously shifting landscape that will see consumer demand remain unpredictable with each new government directive.
The continued rise of VoD services is likely to be a key theme for the coming year, with new services expected from US studios including NBCU, Warner (albeit dependent on the HBO licensing deal with Sky Atlantic), and CBS, to add to the launches of Disney+ and BritBox in the last year or so. The complementarity of traditional pay-TV and SVoD services was a fairly short-lived trend.
More recently, we’re seeing evidence of cord shaving and cord cutting, as has long been the case in the US. This is reflected in a steady decline in the penetration of traditional pay-TV services, particularly as older consumers have begun to see the benefits of relatively low cost and flexible access to pay-TV. Remaining questions include: how many SVoD services will people take? How will they be aggregated? Is there a role for re-bundling? Can a major AVoD service establish itself, and what will the new equilibrium between traditional TV and SVoD services look like?
These may not all be answered in 2021, but we are helping our clients with these issues as they are drawn into sharper focus, following the lockdown induced temporary spike in traditional TV viewing, and seemingly permanent increase in viewing to on-demand services.