Video Drove Media Budgets’ Return to Growth in Q4

Dan Meier 19 January, 2023 

One in five UK marketers upped their budgets in Q4 2022, even as the economy entered a technical recession, according to the IPA Bellwether Report published today.

The final three months of the year saw 20.2 percent of respondents increase their marketing spend, versus 18 percent cutting their budgets. The net balance (+2.2 percent) remains in positive territory for the seventh consecutive quarter, the longest uninterrupted growth period since before the pandemic. 

The report reveals a reversal of fortunes for main media budgets, with a net balance of +4.4 percent in Q4, compared with -3.1 percent in Q3. This return to growth was driven by video (+13.7 percent) and other online media (+6.3 percent), despite declines for published brands (-3.9 percent) and out of home (-8.8 percent).

“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,” said IPA Director General Paul Bainsfair.

Ups and downs

Though further economic contraction looms, the outlook for marketing budgets in 2023/24 remain “strongly positive”. The Bellwether data showed 39.5 percent of companies expecting to raise their marketing budgets for the next two years. Only 15.3 percent anticipated spending cuts, resulting in a +24.2 percent net balance, signalling a “robust outlook” among UK marketers.

That optimism is spread across all Bellwether categories, explained IPA, predominantly events (+18 percent net balance), main media (+13.4 percent) and sales promotions (+7.9 percent).

On the flip side, business sentiment among the panellists was stuck in pessimistic territory during Q4 2022. According to the report, 41.8 percent of respondents considered their specific industry’s financial prospects worse than Q3. Just 8.7 percent reported optimism for their sector’s prospects.

The net balance of -33.2 percent marks an improvement on the attitudes expressed in Q3 (-44.3 percent), but represents the second-most pessimistic outlook since Q2 2020, at the height of the pandemic.

Asked for their views on their own company’s prospects in Q4, 32.8 percent felt more downbeat than Q3, double the proportion who felt more optimistic (15.6 percent). Overall negativity was reduced however, with a net balance of -17.2 percent, up from -27.6 percent in Q3.

Short and shallow

The trade body said the figures reflect “downbeat expectations for the year ahead as a persistence of high inflation, increased interest rates and low consumer confidence raise the prospect of a UK recession.”

Indeed the report’s authors at S&P Global Market Intelligence forecast GDP to shrink by 0.8 percent in 2023 “as household incomes are squeezed by inflation.” Companies are therefore expected to cut expenditure, leading to ad spend falling by 0.3 percent this year.

S&P anticipates the recession will be “short and shallow”, predicting moderate growth to return in 2024. GDP is forecast to grow 0.6 percent in 2024, causing ad spend to recover to 1.2 percent annual growth. That recovery is projected to continue through 2025 and 2026, reaching 2.0 percent growth in 2026. 

IPA’s Paul Bainsfair welcomed the Q4 results, noting that companies are “holding their nerve” amid deteriorating economic conditions.

“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,” he said.

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