The advertising industry is currently facing one of its toughest challenges since the 2008 financial crisis, as warned by Dame Carolyn McCall, CEO of ITV. The impact of the downturn is seen in declining revenues and share prices, which indicates a concerning situation for advertisers and marketers alike. However, amidst the gloom, there are opportunities for marketers to not only weather the storm but also thrive during this period of uncertainty.
“This is the worst advertising recession we’ve seen since the global financial crisis so far in this half,” the CEO said.
According to figures released today by the Advertising Association, UK ad spend was flat in the first quarter, and the market is projected to grow by a mere 2.6% in 2023, a far cry from the 3.9% decline experienced during the height of the 2008 financial crisis, when the stock market collapse led to a significant decline in ad spending, reaching over 27% across all advertising channels. During that period, the advertising landscape was primarily dominated by traditional linear advertising methods such as radio, TV commercials, site homepage takeovers, and similar formats.
In this context, James McDonald at ad industry body WARC said, “With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry.”
Yes! So, the recession fears have intensified as economic growth stalls, and the Bank of England raises interest rates to combat inflation.
Even ITV, a major broadcaster particularly reliant on advertising, has not been immune to the advertising recession. The company reported an 11% drop in total advertising revenue in the first half of the year, leading to a significant decline of over 60% in pre-tax profits. The downturn was further magnified by investments in the ITVX streaming service.
Despite the challenges, there are potential positive developments on the horizon. ITV remains cautiously optimistic, expecting the ad market to improve in the third quarter, driven by major sporting events and popular reality shows. Ad revenue is predicted to grow by 7% in August after a 4% decline in July.
Some similar points in history have shown that businesses that maintain or increase their advertising budgets during recessions reap significant benefits. During the 1981–82 and 1974–75 recessions, companies that continued to invest in advertising experienced remarkable growth, up to 256%. In contrast, competitors that reduced or eliminated their ad budgets struggled to keep pace.
What’s crucial during an economic downturn is maintaining communication with existing clients. Loyal clients form the real foundation of any business, and focusing on their needs and providing value can consequently yield substantial returns. During challenging times, accounting firms can strengthen their bond with clients through regular communication, ensuring they continue to trust the firm’s stability and expertise.
Furthermore, marketers in such a situation should explore new strategies and offerings tailored to the economic climate. Incentives such as discounts, interest-free loans, and special promotions can attract cost-conscious consumers. It is also necessary to consider the value provided to clients, especially when scrutinizing service bundles and pricing models.
To adapt to the complexities of modern marketing, firms can consider outsourcing marketing projects to specialized agencies. Outsourcing allows companies to access expertise and diverse marketing strategies that can boost their visibility and competitive edge.
Focusing on unimpacted industries is another realistic strategy during a recession. Certain sectors, such as healthcare and government industries, have historically demonstrated resilience during economic downturns. Targeting these industries can provide stability and growth opportunities for businesses.
As the saying goes, “When times are bad, you must advertise.” Embracing this widely accepted industry adage and making the most of the opportunities presented can help marketers thrive, even in challenging economic times