Google’s parent companies, Alphabet and Snap, recently announced earnings for the third quarter of 2022. The decline reflects a slowdown in advertising spending, which has weighed on earnings and made the advertising market even tougher as a recession becomes more likely.
The advertising industry is now desperate to come up with a last-ditch plan of how to deal with the worst-case economic scenario. “September was probably the worst month for the digital ad market,” an ad tech executive told Insider, noting that the month was particularly steep. “Snap was especially bad.”
It’s not just digital advertising that’s been affected. The entire advertising industry is gearing up for budget cuts in the near future.
Another official also testifies:
“Stop pretending that the upfront market is fine, the scatter market is fine, digital advertising isn’t going to crash. All the tides are coming together and the worst is happening. That It’s bad if you don’t start planning with the premise.”
75% of companies increase scrutiny of advertising budgets
The World Federation of Advertisers and Ebiquity surveyed 43 multinational companies that spend more than $44 billion (approximately 6.42 trillion yen, converted to 1 dollar = 146 yen) in advertising annually. In a recent survey conducted in partnership with Ebiquity, three-quarters of companies said they “agree” or “strongly agree” that they “will be scrutinizing their budgets in 2023.” rice field. And 29% of companies surveyed said they plan to cut marketing and advertising spending in 2023.
According to ad executives, the impact on the advertising industry, including how many marketers will really cut back on ad spend, will not be felt until Q4 2022 to Q1 2023 and beyond. That’s right.
Advertising giants IPG, Omnicom, WPP and Publicis Groupe have all raised their full-year 2022 forecasts. That said, many of these companies have also briefed investors on contingency plans they are drawing up for 2023.
IPG CEO Philip Krakowski said on the company’s third-quarter earnings call that many of its clients are considering where to move their marketing budgets during the recession. Some clients have stopped digital measures, but it is not possible to predict the scale of these cost reductions from the end of the third quarter to the fourth quarter.
Omnicom plans to cut office space around the world and is considering moving some operations offshore or automating them, he said.
Morale among young marketers is also low
Some companies, such as Microsoft and P&G, have already cut their marketing budgets as of summer 2022, but others have yet to go that far.
General Electric (GE) chief marketing officer Linda Boff said the company hasn’t cut back yet, but reduced the number of large advertising events it attends each year from five to two. He said it was likely to be reduced to 3.
Expedia CEO Peter Maxwell Kahn also said in the second-quarter earnings call in August that the company has no plans to cut costs, but that it wants to get more value out of the money it spends.
Uncertainty is driving advertising agencies to prepare for the coming recession. Many insiders have pointed to a decline in the number of brand new ventures, which has made agencies cautious about hiring.
In the midst of the “Great Resignation,” one recruiter in the advertising industry, who was busier than ever in 2021, said many agencies had stopped hiring, and new jobs were opening. He says it’s almost gone.
Due to these cost cuts and uncertainty about the future, some young employees at advertising agencies are seeing a drop in morale.
Brad Jakeman, an adviser to the Boston Consulting Group and former president of PepsiCo Beverage Group, told Insider at a conference that the biggest problem for marketers right now is that many of our younger employees are already in recession. He said it was something he had never experienced before.
Agencies are busy demonstrating the long-term value of their services so as not to lose clients.
“Marketing spending is discretionary and should not be seen as a non-critical investment. All the data around the world shows that even in a downturn, marketing investment is important. I think you can believe that a company that sees it as having a competitive advantage.” (Jakeman)
[Original: As Alphabet and Snap report sharp ad spending slowdowns, the ad industry is bracing for the worst]
(Edited by Ayuko Tokiwa)
Source: BusinessInsider
David Ortiz is an opinionated and well-versed author, known for his thought-provoking and persuasive writing on various matters. He currently works as a writer at 24 news breaker, where he shares his insight and perspective on today’s most pressing issues. David’s unique voice and writing style make his articles a must-read for those seeking a different point of view.