Perfect Storm -- Brexit And Cost-Conscious Brands Slow Down Ad Growth

There seems to be a sweet spot in advertising right now -- only one that's not particularly sweet and will instead leave a sour taste. Brexit and brands querying costs are entirely separate developments, but they are combining forces to curtail ad-spending growth.

The latest of many to revise down its forecasts for the UK was GroupM. Although it has to be said that the WPP-owned media agency is still forecasting growth, after several years of ongoing growth, the overall rate is down from 7% to 4% (rounded up or down). That means that last year's growth of 6% will be replaced by just 4% this year.

Doesn't sound too bad, does it? However, you only need to take a cursory glance at the table at eMarketer to see that beyond the industry average, the really bad news here is for print and television. It will come as no surprise that national and regional newspapers, as well as magazines, are forecast to dip by double digits this year -- it's just a continuation of what is already happening.

The big potential surprise is tv -- down 2.7% this year before climbing again 2% in 2018. In other words, a plateau across 2016 to 2018 with a little dip in between. This contrasts with an 11% increase in Internet advertising this year.

If one were looking for a reason here, it would be that if agencies are looking to cut back on traditional media spend beyond print, then expensive old tv would be an obvious place to start. Perhaps more tellingly, we should remember that in a football- or soccer-mad country tv revenues soar with a Fifa World Cup or UEFA European Championships, and neither will happen in 2017. That may be as good a reason as any for why tv spending might dip a bit before going back to where it was next year, when we have the World Cup in Russia?

The reason that growth for the entire market is being forecast down is pretty clear. There is so much uncertainty around Brexit and the UK's future trading relationship with the EU that companies cannot be blamed for keeping their powder dry. There's a lot being said about advertisers cutting back on YouTube and Facebook over extremism issues, but let's face it -- they are in the section of the industry that is forecast to show the greatest growth. The YouTube ban does not appear to have hurt Google's profits, so I think talk of growth going south cannot be aligned with social or video advertising. It just doesn't stack up.

The point that should be made more strongly, in my opinion, is a change of heart among brands. On the one hand we have the uncertainty of Brexit and the prospect of inflation caused by the rising price of imports. On the other, we have a questioning among brands as to whether they really need all this stuff -- or at least so much of it. 

P&G and Unilever are leading the way here by cutting down the number of agencies they work with and insisting there is greater transparency and that assets are sweated for longer, rather than being reproduced around the world at great expense. Put simply, the new trend is to do more with less and to do that with fewer people, fewer agencies and fewer campaigns.

So just at the time that advertisers are wondering whether they need to spend quite so much, we have Brexit providing extra justification for holding back. A penchant for penny-pinching coinciding with a newshook to hang it on. 

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