We are nearly three-quarters of the way through this second pandemic year and new pressures on companies and people are emerging as the pace of the 2021 advertising recovery has surprised on the upside.
“Everything is intense at the moment – you’re hurtling around at a million miles an hour,” one agency leader says, talking about the range of issues that his company is juggling, from a blizzard of pitches and high employee churn to an unexpected surge in the September TV ad market and the difficulties in persuading staff to return to the office.
At the start of 2021, when the UK and many other countries were thrust into new lockdowns, I picked seven trends that would shape the year ahead for adland.
These still hold true: the rise of ecommerce, customer experience and content production, agencies reinventing, new efforts to improve diversity and inclusion, the rise of more responsible advertising in the face of regulation, and companies investing in less office space, less travel and more remote working.
But as the year has unfolded, and in light of half-year financial results, we can see new changes in the market.
Here are six more trends for the rest of 2021.
Advertising is driving and out-pacing sales growth
Big, established advertisers are investing in advertising and marketing ahead of sales. Diageo’s marketing investment was up 23% this year compared with organic net sales up 16%. Procter & Gamble increased ad expense 12%, well above organic sales growth of 6%.
New disruptors from Cazoo to TikTok are betting especially heavily on advertising to build their brands, win share of voice and drive digital performance in a virtuous loop, and many newer and smaller players are looking to follow the same “hypergrowth” playbook with investors’ backing.
The latest forecast from the Advertising Association and Warc has predicted UK ad expenditure could smash records in 2021 with 18.2% growth, easily overturning the 7.2% decline in 2020.
Even so, many in adland have been caught by surprise by the strength of demand at the start of the autumn as brands including Asda, Moneysupermarket and British Gas have already launched new campaigns. The UK’s TV ad market should be up as much as 25% in September versus a year ago and 20% on two years ago.
‘Two-year’ revenue stack reveals true extent of growth and two-speed market
Practically every company’s numbers are pointing upwards after last year’s slump, which is why many investors are interested in a “two-year” revenue stack that compares 2021 with 2019.
Revenue from consumer packaged goods clients rose 7.2%, healthcare 10.8% and technology 12.7% in H1 versus two years ago, WPP said at its half-year results presentation.
When it comes to advertising revenues, tech firms have enjoyed dramatic two-year growth. Facebook’s Q2 2021 revenue was up 72% compared with 2019. Snap was up 153%, Pinterest 135% and YouTube 94%, according to data from Lightshed Partners.
By contrast, two-year growth for many of the established agency groups and media owners has been little better than flat and, in some cases, remains in negative territory as sectors such as outdoor are still in recovery mode.
Interpublic has been the stand-out performer of the big six agency groups, up 8% in Q2 2021 versus 2019, well ahead of its rivals – a trend that was under way before Covid and has accelerated. WPP and Publicis Groupe, which both struggled before the pandemic, are faring better – up 1.3% and 2% respectively compared with Q2 2019.
A new adtech boom
Mergers and acquisitions have been running at record levels globally in 2021, which is on course to beat 2007 in terms of deal value, according to the Financial Times, and adtech has seen a flood of money as investors and private equity reckon companies that operate in and around the Google, Facebook and Amazon eco-systems will benefit.
DoubleVerify, Integral Ad Science, Outbrain and Taboola are some of the companies that have floated on the stock market this year, joining a growing cohort that includes The Trade Desk and Pubmatic. They have all chosen New York to list – a blow to London’s reputation.
Investors are also supporting consolidation among traditional media owners with WarnerMedia merging with Discovery, Future buying Dennis Publishing, Daily Mail & General Trust slimming down and going private, and Channel 4 facing a likely sale (a government consultation on privatisation ends on 14 September).
M&A fever may ease only when the cost of debt starts to rise – a risk when commodity and labour shortages are threatening to push up inflation.
Employees are under new pressure as market rebounds
The unexpected strength of the advertising boom has had a knock-on effect on employees, who were already under pressure because of remote working and job cuts last year.
Client satisfaction levels are running high, yet agencies and media owners are stretched as they face a sudden upsurge in work and pitches. One creative director bemoans the fact that they had more than a dozen video meetings inserted in their diary on their first day back from holiday.
All of which has increased the strain on mental health, led to increased employee churn and created the hottest advertising jobs market since perhaps the 1980s. There are multiple stories of young agency executives doubling their pay to move to a rival agency or big tech company in recent months.
In a curious twist, it meant that Nick Priday, chief financial officer of Dentsu International, told analysts at its Q2 results that “we’ve had to spend less on severance [payments to staff] than we budgeted for because of a rise in attrition levels across our business” as employees chose to quit.
Advertising’s culture is under scrutiny
The results of the first “All In” inclusion census in June revealed women and minority groups are underrepresented at senior levels and, in some cases, are more likely to quit the industry. UK advertising has work to do to improve its culture, including combatting sexual harassment and bullying.
Arguably, long periods of isolation over the past 18 months have led to increased introspection and heightened emotion around a number of cultural and political issues that have shaken the advertising world – directly or indirectly.
Recent flashpoints have included social media companies’ duty to curb hate speech against black England players at Euro 2020, advertisers coming under pressure to boycott GB News over its coverage of immigration and the JWT sex discrimination case ruling in favour of two men, when the Daily Mail’s reporting focused instead on the personal life of a female creative director at the agency.
The fact that advertising has found itself embroiled in the wider, so-called “culture wars” is a reminder of this industry’s importance in shaping attitudes and funding content.
Getting serious about environmental sustainability
A summer of dramatic weather events around the world combined with reduced corporate and leisure travel has made companies and consumers recognise that much more needs to be done to drive environmental sustainability. The United Nations’ climate conference, COP26, in Glasgow in November will push the issue higher up the agenda.
Even before the pandemic, 72% of consumers said they were buying more environmentally-friendly products than five years ago, according to Accenture. “This is a moment where potentially we can make a great leap forward in the sustainability of our products and our industry,” Seb Munden, general manager of Unilever, UK & Ireland, told an ITV advertising showcase in June.
Initiatives such as the Advertising Association’s Ad Net Zero, which seeks to reduce the carbon impact of advertising production, media buying and live events and awards to zero, are a step forward.
Plus the WFH elephant (not) in the room
One other issue that isn’t new but is pressing is the struggle to persuade employees to return to the office, even though a good proportion of them are now double-vaccinated.
A month or so ago, I went to visit a leading UK advertising company to meet the chief executive and discovered, on a tour of their deserted building, that three other senior executives were the only other members of staff out of a workforce of hundreds who were in that day – apart from the security guards.
Few advertising leaders sound confident that perks such as free food, refurbished office space and social events will encourage employees to rush back when the pandemic is not yet over.
“Some are anxious, some are enjoying the routine of being at home, some don’t like the commute and there’s inertia,” one agency chief says. “We’ve all been a bit soppy with everyone. I think working in the office needs to be mandated, rather than a gentle ask.”
Bosses are juggling their desire to bring teams together with cost-savings. One agency founder recounts how they have moved to a smaller London office and cut their rent bill by three-quarters.
Ultimately, some element of home working is here to stay. The office ought to be a source of competitive advantage, rather than improved profit margin, for a creative industry that thrives on inspiration, networking and learning from others.
The rest of 2021 promises to be intense.
Gideon Spanier is UK editor-in-chief of Campaign