Despite continued fears of an impending recession, more than one-third of advertisers expect the business climate to improve in the next three months and about half expect it to stay the same. And while the talk has centered around advertising pullbacks, just over half say their ad budgets this year will be the same as they were in 2022, while 30% say they will increase. These are among the takeaways from a survey of 305 marketers and agency reps conducted by Advertiser Perceptions in December.
Whether its supply chain issues, inflation, rising interest rates or elevated energy prices, advertisers have “rolled with the punches, and largely have adjusted their budgets,” says Eric Haggstrom, Director, Business Intelligence at Advertiser Perceptions. “As they're looking to 2023, they're looking to increase those budgets for the most part,” he adds, while noting that some industries like auto and are still struggling and haven’t resumed their historical ad spending levels.
Even with most advertisers planning to maintain or up their ad spending, that doesn’t mean 2023 will be smooth sailing for all media. Advertiser Perceptions says the ad channels with the best prospects for spending increases in 2023 include connected TV, social media platforms, and web-based video. Traditional media channels, meanwhile, remain the most vulnerable to macroeconomy-related budget cuts. Traditional outdoor/out of home and print top the list of media that advertisers said they paused or pulled in December. And while 19% said they paused or pulled from their AM/FM radio budget in December, that was down from 25% in October 2022, when the largest share of advertisers were cutting back on their overall ad budgets.
Digital/streaming audio is one of the least vulnerable channels with 14% saying in December they’re cutting its budget, the same as for red-hot connected TV. “There is optimism around many of the digital formats going into this year,” Haggstrom explains. “Digital audio is relatively strong.”
Shift To Higher-Performing Media
Most advertisers are continuing to shift spend to higher-performing media, even after a significant decline in this behavior in December compared to October. This is a long-term trend that is now accelerating as competition in the media industry heats up. “There are mouths to feed and ultimately advertisers are shifting spend to more measurable performance-based media where they can show more quantifiable results,” says Haggstrom.
However, as advertisers reallocate budgets to channels where they get the most bang for their buck, “there is a concern about potentially leaving the top of the funnel empty,” according to Nicole Perrin, VP of Business Intelligence at Advertiser Perceptions. “There is awareness that as they're focusing on the bottom of the funnel and performance-oriented channels, does the top of the funnel dry up. Will they, at some point, have to come back to the upper funnel and more awareness-oriented media?”
Looking back on last year, 43% of advertisers surveyed said their actual 2022 ad budget was in line with their plans at the beginning of the year. About three in ten (28%) said their ad budget was cut moderately while 18% saw their ad budget increase moderately.
Earlier studies have shown that decreased advertising causes a loss in market share while increases have the opposite effect. Advertiser Perceptions is the latest to confirm that correlation. It found one in four advertisers said they gained market share in their category last year vs. 2021. And within that segment, two in five reported increasing their ad budgets compared to the plan, while most of those that lost market share cut their ad budgets. In other words, there was a strong correlation between increased ad budgets and gains in market share—and between decreased ad budgets and losses in market share.
Meanwhile, the share of advertisers who say they were negatively affected by supply chain disruptions continues to decline. Inflation is more likely than supply chain problems or rising interest rates to be a problem, Advertiser Perceptions says, and it’s still affecting just over half of advertisers negatively.
Advertiser Perceptions “Macroeconomic Effects and Perceptions Study” was fielded from Dec. 5-13, 2022. The survey included 305 marketer and agency reps that are involved in media brand selection and whose companies have spent $1 million or more on advertising in the past 12 months.