IPA Bellwether: Digital budgets rise despite overall market sag

While UK marketing budgets were increased during the first quarter of 2018, it was the slowest growth seen since 2016.

The IPA’s Q1 2018 Bellwether Report found that a balance of only 5% of companies are raising their budgets in the first quarter, down from 8.6% in the previous quarter

This balance is calculated by deducting the 17.9% of companies that have lowered their budgets from the 22.9% that have increased. 

"Despite the slowdown, this quarter's results mark over five years of successive upward revisions to marketing budgets, signifying that regardless of external pressures – particularly Brexit uncertainties – most marketers still appreciate the value of advertising in building and maintaining their brands," Paul Bainsfair, director general of the IPA, said. 

Overall market slowdown and the recent scandal surrounding Facebook notwithstanding, IPA Bellwether panellists have continued to step up their adoption of internet advertising during the latest quarter. 

Internet marketing spend was raised for a 35th successive quarter at the start of 2018, albeit at a slower rate with a net balance of 8.7%, down from 10.9% in the previous quarter. 

Within this category, search/SEO expenditure also grew at a slower rate, with the net balance falling to +5.6% from +12.4% in Q4 2017.

"Once again we are also seeing significant investment in internet budgets - for 35 quarters continuously – showing that in an 'always on' world, marketers are following the eyeballs. While we welcome this, it is worth remembering that the evidence shows that the most effective advertising achieves a 60:40 balance of brand building to sales activation media," Bainsfair commented. 

Meanwhile, mobile advertising has stagnated with an equal proportion of marketers revising their budgets up to those indicating a fall, resulting in a net balance of +0.0%, from +6.0% in Q4 2017.

Mobile advertising might have stalled in its growth but the channel remains essential to many business models and consumer needs, Jo Lyall, managing director for Mindshare UK, commented, "We have recently conducted research to show that technology such as augmented reality will start to play a key part in consumers purchasing decisions as it evolves from the ‘evaluation’ or ‘post-purchase’ stages to facilitate direct purchase – so we believe that mobile will still be a strong contender for marketing dollars in the years to come."

One area that is doing better than the previous quarter is events marketing. Budgets in this category have now been raised continuously for four-and-a-half years, with the respective net balance improving to +7.8% (from +5.5%).

Main media advertising goes negative

Main media advertising, which includes big-ticket campaigns related to TV, radio and cinema, fell from 1.7% at the end of 2017 to a net balance of -2.1%. 

This is only the second time in the past five years that the net balance in this category fell below zero. 

Other areas to suffer budget cuts during the first quarter included market research (-3.1%, up from -5.4%), other (-3.0%, previous: -5.8%), sales promotions (-5.3%, compared to -3.0%) and direct marketing(-5.6%, from -4.5%). 

According to the report, marketing executives are pursuing cost and efficiency savings to bolster spending in other areas or to balance already squeezed budgets. 

PR, meanwhile, has stagnated at +0.0%, up from -6.6% in Q4 2017.


While marketers have a bleak view of the UK's overall financial outlook at -13.6% vs -12.1% in the previous quarter, the report has nevertheless raised its ad spend forecast to 0.8% for 2018 from 0.3%. 

This raised optimism is due to better than expected growth in 2017 (1.7% versus a previous estimate of 1.4%) and stronger forecasts for GDP and consumption growth from the Office for Budget Responsibility (OBR). 

But, the forecast is still muted due to Brexit-related uncertainties and ongoing pressure on household finances. The implementation of GDPR too was cited as a threat by panellists from both brands and media agencies as it may deter marketing campaigns.

"I believe we’ll soon see a gulf emerge between those who can comprehensively address and resolve GDPR concerns and those who cannot – which will itself play out in terms of where investment lands in the quarters ahead," Margaret Wagner, executive vice-president, EMEA growth officer at Merkle, said. 

The report expects some of these factors to persist into 2019, with ad spend expected to grow just 0.4%. However, stronger gains in adpsend are anticipated for 2020-2022, in line with an expected improvement in the economy.

"The ongoing slowdown in marketing budget growth comes as little surprise in the context of the challenging business environment and disconnect in recent surveys between budgets and subdued financial prospects," Dr Paul Smith, director at IHS Markit and author of the Bellwether Report, said. 

Rising costs and the ongoing uncertainty that exists over the future direction of the UK economy in a post-Brexit world have led to caution and belt-tightening across a number of sectors, especially those more exposed to retail and consumption, he continued.

"Although the latest survey shows anticipated growth in 2018/19, the degree of optimism is the lowest in five years," Smith said. 

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