For the UK economy to fire on all cylinders in 2018, there appears to be one major stumbling block: Brexit. Still lingering with uncertainty, Brexit was cited as one of the main reasons 2017 ad spend growth closed at 1.4% and why there is estimated growth of only 0.3% in 2018 (IPA).
But looking further under the skin of this issue, another contributing factor arises: uneasiness around digital advertising, which, following several big scandals in 2017, resulted in much slower growth of internet ad spend in Q4. Interesting, especially when digital is the only channel currently pushing growth in total ad spend figures as more traditional advertising channels suffer. Indeed, 2017’s final quarter saw the slowest growth curve since Q3 2016.
Here’s What’s Hot’s view of what to expect amidst the economical and market uncertainty of 2018.
In 2017, living standards were squeezed but there is hope that things will get easier for UK households this year. While consumers may find some stability, businesses are likely to remain cautious until Brexit and our position in the single market is resolved. Rising prices were, however, a cause for worry, with fears it will depress sales and demand. Higher import costs were also viewed as a business threat, a particularly acute problem in retail.
Bloomberg is predicting inflation numbers will start edging back over the course of 2018 as the impact of the fall in sterling fades and wage growth picks up slightly. Speculation will continue around whether the Bank of England will raise interest rates again in 2018 – something experts are hinting is likely to happen.
Overall, Bloomberg is reporting the economy will grow by 0.4% a quarter in 2018 and 1.4% overall, underperforming a little compared to 1.8% in 2017.
In terms of advertising, the latest IPA Bellwether report released this month proved that internet advertising remains the best performing sub-category; one in 10 advertisers allocate more than 50% of their marketing budgets to digital.
More traditional formats like TV, press, cinema and radio underperformed, described in the Bellwether report as ‘disappointing’. Direct marketing, meanwhile, saw growth of 16.7%, which some have attributed to GDPR and the resulting opportunities to focus on personalised communications from compliant and secure data.
GDPR drew a mix of concern and optimism. While some are worried the regulation will make it harder to contact potential consumers, others view it as providing an opportunity to win business from competitors and improve their direct marketing to potential customers.
In times of uncertainty, it makes for tricky investment planning. Advertisers may choose to default to cost-value areas such as direct response digital, down-weighting bigger-ticket media.
Unstable times require dynamic, responsive decision-making and an examination of the evidence available. The received wisdom of how to respond in a volatile market is to maintain advertising budgets and avoid over-spending in activation.
As 2018 progresses, we’d recommend maintaining SOV/SOM ratios as a minimum, and reviewing the short-term market for value if the market softens.