Companies’ total marketing budget growth was at its highest point in the first quarter of this year since Q2 2023, according to the latest IPA Bellwether report. But while there are signs of optimism within the ad industry, many advertisers are holding off on increases in marketing budgets. And the report forecasts an overall decline in total ad spend this year, in the context of an anticipated fall in GDP.
The Bellwether report primarily gauges the state of the industry by surveying advertisers on whether their total marketing budgets increased, decreased, or stayed the same during the most recent quarter. This provides a snapshot of growth – essentially the difference between the percentage of firms who have increased their budgets and the percentage who have decreased.
In Q1, this figure was positive, with a net balance of firms revising their budgets upwards of +8.2 percent. While 12.9 percent of those surveyed saw cuts to their marketing budgets, 21.1 percent saw increases.
Main media marketing, which covers TV, publisher brands, outdoor, radio, and online, saw a net balance of 5.8 percent. Video was one of the big winners, with a net balance of 7.9 percent increasing their budgets, while other online media saw a net balance of 10.5 percent. However publisher brands and out of home both saw retractions (-1.9 percent and -12.4 percent respectively).
But while the overall picture was positive, this still leaves 66 percent of marketers seeing no change to their marketing budgets. While this isn’t that unusual, in a time of high inflation, stagnant marketing budgets are in a sense reduced marketing budgets (in real terms).
“Cautious optimism is a key phrase here, and echoes what we’ve seen in our own predictions for the year ahead,” said Ryan Storrar, CEO of EssenceMediacomX. “While it’s clear that many brands have had to prioritise their marketing tactics and cut back in many areas, the fact that many still plan to expand their marketing budgets shows that advertising plays a prominent role in their futureproofing efforts.”
A mixed picture for the year ahead
Looking to the rest of 2023, the report paints a mixed picture.
Marketers are overall upbeat about the rest of 2023. Over a third (36.6 percent) expect to see higher total marketing budgets in real terms (i.e accounting for inflation) in the year ahead, while 16.9 percent expect cuts.
And marketers surveyed generally feel positive about their own financial prospects for the year ahead, with a net balance of +7.0 percent saying they are optimistic about their business outlook.
Despite these positive expectations, the Bellwether report still expects an overall decrease in UK ad spend of 0.9 percent this year, a downgrade from its previous forecast of a 0.3 percent decline. And there isn’t a particularly fast rebound forecast for the years ahead: the Bellwether report predicts 0.5 percent growth in 2024, followed by growth of 1.6 percent, 2.0 percent, and 2.2 percent in 2025, 2026, and 2027 respectively.
But Liz Duff, head of commercial and operations at Total Media, pointed out that forecasting future ad spend is more difficult this year than usual. “It’s interesting to note that marketers are committing spends later than usual, likely due to rapidly changing audience behaviours, making forecasting for the rest of the year challenging,” she said. “However, the growth in main media marketing shows that marketers are continuing to support brand activity, and the expansion of sales promotion budgets demonstrates a commitment to using short-term measures to achieve success. Overall, these findings bode well for the marketing industry in the UK, and we can anticipate further developments as the year progresses.”
