Home Advertiser Why A Recession Won’t Change What Matters To Marketers

Why A Recession Won’t Change What Matters To Marketers

SHARE:

For much of 2022, business leaders have been bracing for a downturn.

But if a recession does hit, advertisers are unlikely to pull back on performance spend as they continue to chase consumer attention amid changing media consumption habits.

In times of recession, marketers typically zero in on driving performance rather than brand awareness, said Jeremy Hlavacek, CCO at Experian Marketing Services.

“Traditionally, when there’s a downturn, there’s a flight to quality, so channels that can be measured are important,” he said.

For example, during COVID, time spent watching connected TV and other types of premium digital video created an explosion of inventory, said Glen Gullickson, associate partner at McKinsey & Company.

“In the next recession, we can expect an acceleration of those trends,” Gullickson said. “And you’re going to see verticals focus on what actually drives sales while cutting operational and experimental budgets.”

Vulnerable verticals

But for brands in verticals that saw unprecedented growth during the pandemic, such as ecommerce, gaming and home goods, a downturn may represent a return to reality as consumers spend less.

The inclination might also be for those brands to pull back, said Polly Bickel Wong, president of agency Belardi Wong.

But “we’re seeing companies lean into marketing spend in order to achieve the top-line revenue numbers investors want,” she said. “Nobody ever says, ‘You had a good two years, so you’re off the hook for the next two.’”

Across all verticals, brands that are capable of weathering the storm should view a recession as an opportunity to increase market share, said Ben Dutter, SVP of product at growth agency Power Digital Marketing. “Some brands are going to focus more heavily on one core audience, but you really should be diversifying and trying to grow market share,” he said.

Subscribe

AdExchanger Daily

Get our editors’ roundup delivered to your inbox every weekday.

In the digital media space, marketers will be competing for less publisher inventory – another consequence of the waning pandemic.

“As the world evolves out of COVID, there are less people sitting in front of their computers, and less screen time means less advertising impressions,” Wong said. “The number-one headwind facing digital publishers is less impressions to sell.”

The performance game

Advertisers will double down on channels that have established performance benchmarks they can optimize toward, meaning that less-mature channels, such as digital audio, could be adversely affected.

“Experimental test budgets would be the first to be cut,” Hlavacek said.

Marketers say digital audio is the channel they’re likeliest to spend less on this year, according to a Gartner survey of 400 CMOs conducted between March and April.

“When we ran that survey, CMOs were still fairly bullish about economic prospects,” said Matt Moorut, director-level analyst for Gartner, “but even at that stage, they were thinking about reducing their audio budgets.”

However, if newer channels like in-game ads drive ROI, especially relative to other channels, marketers will be incentivized to stick with them and even scale their spending, Moorut said.

For DTC marketers, focusing on performance is business as usual. But customer retention should also be a priority, Wong said, “because lifetime value comes from your existing customer file, and new customer acquisition always comes at an investment.”

CTV vs. linear TV

As brand awareness campaigns are deprioritized, marketers will continue migrating away from linear TV and toward CTV, which offers more precise targeting and measurement than linear, Hlavacek said.

In a recent survey, 23% of Belardi Wong’s DTC clients said they planned to increase their spending on CTV during the second half of 2022.

And as popular streaming platforms like Netflix and Disney+ turn to advertising, it makes sense to allocate larger budgets to CTV, she said.

“Streaming TV is huge for new customer acquisition, but getting on those platforms and getting targeting and segmentation right will come at a high cost,” Wong said. “Targeting certain segments, like women over 55, will always work on linear TV, but we don’t see huge demand for linear TV right now.”

Social media and search

There is ongoing demand for social media, and TikTok is poised to continue to grab audience attention from Facebook, YouTube and Twitter.

“There’s going to be money spent on social media either way, but the mix might shift to channels that are showing more performance,” said Hlavacek.

Beyond shifting audience preferences, platforms like Facebook are also reeling from signal loss due to Apple’s AppTrackingTransparency.

“If you’re heavily concentrated in the mobile app download space – and you look at the moves Apple has made – that’s real disruption,” said Emily Del Greco, a partner at McKinsey & Company.

But search ads will continue to be a hot commodity because they’re closely tied to performance.

“Competition has increased on Google Search, and Google has been changing the way it represents results on its page so you see more visual ads, more snippets, before you ever get to a landing page,” Gartner’s Moorut said. “Those two things will drive further investment in search advertising.”

The rise of retail media networks will also create new opportunities for search-based marketing.

“Search doesn’t just mean AdWords anymore; it includes Amazon,” said McKinsey’s Gullickson. “And when you think about what you’re actually buying on-site in retail media, a lot of it looks like search.”

Hiring, partnerships and operations

A recession would also likely spur changes in how marketers approach hiring and operations.

While Big Tech platforms like Twitter, Facebook and Google are hitting pause on hiring, many ad agencies are expanding their in-house talent and investing in technology.

“In terms of operations, we’ve seen decreased outsourcing,” Moorut said. “And any business operations that were not already cloud-based and built for virtual workers will continue to move in that direction.”

AI-based alternatives for art and graphic design may currently be getting a lot of attention, but most marketers are automating ad ops and data processing rather than creative, Moorut said.

So, at least for now, most advertising jobs seem to be safe from the robots.

“The economic data doesn’t show any issues around jobs right now,” Hlavacek said. “But, if there was a severe recession, people will look at expensive manual processes and switch to cheaper, more efficient automated processes.”

However, a recession wouldn’t bode well for commitments to environmental sustainability. A recent Gartner survey of CEOs and CFOs found that sustainability would be the first innovation category cut if inflation remains high, Moorut said.

‘Slightly less dire’

Still, despite recession-related doom and gloom, marketers feel more optimistic now about the economy than they did during the first half of 2022.

The mood is “slightly less dire,” said Kate Scott-Dawkins, global director of business intelligence for GroupM.

“We’ve had two quarters of GDP decline, but strong job numbers, low unemployment and flat consumer expenditure,” she said. “That’s painting a clouded picture, and it’s why CEOs are talking about uncertainty.”

But although some agencies shelved their recession spending plans from earlier this year, they will remain cautious with their budgets going forward.

“Those recession plans are still there,” Hlavacek said, “and they can be dusted off at any time.”

Must Read

‘Incrementality’ Is The Buzzword That Stole Prog IO

Well, that’s a wrap on Programmatic IO Las Vegas 2024! The AdExchanger editorial hopped on stage for a live recording of The Big Story to round up all the moments that made us go “a-ha” this week, including observations on commerce media, CTV and generative AI.

Paramount And Shopsense Add Programmatic Demand To Their Shoppable Ad Network

What if the new storefront is a person sitting on their couch and scrolling their phone?

Scott’s Miracle-Gro Is Seeing Green With Retail Media

It’s lawn season – and you know what that means. Scott’s Miracle-Gro commercials, of course. Except this time, spots for Scott’s will be brought to you by The Home Depot’s retail media network.

Privacy! Commerce! Connected TV! Read all about it. Subscribe to AdExchanger Newsletters

Walled Garden Platforms Are Drowning Marketers In Self-Attributed Sales

Sales are way up; ROAS is through the roof across search, social and ecommerce. At least, that’s what the ad platforms say.

Comic: Working Hard or Hardly Working?

Shadier Than Forbes? Premium Publishers Are Partnering With Content Farms To Make A Quick Programmatic Buck

The practice involves monetizing resold subdomains jammed with recycled MFA articles produced by notorious content farms.

Adalytics Claims Colossus SSP Is Misdeclaring IDs In Its Bid Requests

Colossus SSP, a DEI-focused supply-side platform owned by Direct Digital Holdings (DDH), is the subject of Adalytics’ latest report released Friday. It’s a doozy.