Commentary
Forrester: Brace For The 'Painful' 2018 Advertising Correction
- by Richard Whitman , Columnist, November 8, 2017
Forrester is out with its predictions report for 2018. It’s a fascinating read and doesn’t contain great news for agencies. On the other hand, the world isn’t coming to end for agencies, per the report, as some would have you believe.
But, Adland is going to have to work a lot harder to justify its existence. I know, Adlanders, you’re probably thinking, “As if we weren’t working hard enough to do that, already!”
No, you are not.
“All the signals are clear,” Forrester concludes. “Customers avoiding ads; the cost of wasted or bad ads; major brands announcing massive cuts in ad spending; and agencies providing downward guidance to Wall Street.”
“The result: Ad spend will be flat in 2018 and cause a painful correction in the agency and adtech markets.”
Yep, pain is in the offing. But think of it this way. Pain is the offing for a lot of industries. But the truth is, for many of you Adlanders at least, you love your jobs and you’re obsessed with the challenges presented by clients. You have that at least. A lot of people can’t stand their jobs.
And, according to Forrester, you shouldn’t think of what’s coming as an advertising budget crisis. It’s more about changing priorities for marketers.
“CMOs can’t defend underperforming media spend focused on customer acquisition as churn rates escalate or stand idly by as digital platforms threaten to disintermediate their relationship with customers,” the report concludes.
“Instead of plowing money into traditional ad spending, CMOs will increase spend on: 1. Revitalizing CX to drive affinity and stem churn. 2. Synchronizing loyalty programs to customer expectations. 3. Understanding how to decode digital platform algorithms. 4. Advancing martech to deliver individualized experiences at scale.”
The result: “Ad spend will be flat in 2018 and cause a painful correction in the agency and adtech markets.”
Anyway, there’s a lot more in this report and you probably ought to take a gander. You can get a summary of the broader report and access it here as long as you show proper ID.
As regards the agency "problem" when billings go "flat" growthwise, that doesn't necessarily mean less profits to a well run agency. Your typical agency in a situation where it's clients are not increasing their spending rates merely exercises tighter control over its own spending, which is something like 65-70% people costs. As for the advice to CMOs to reduce spending in "traditional media"--meaning, mainly TV--- and "understanding how to decode digital platform algorithms" , is that a realistic solution and does anybody who has ever worked with a CMO---otherwise known as an advertiser's marketing director---aka super brand manager-----think that such people will dig that deeply down into the details of digital media buying, which may account for 5-10% of their ad spend ( I'm referring to your typical TV-type branding advertiser )? Much more likely is that an advertiser with "flat" sales growth---hence "flat" ad spending, will think about spending all of its ad dollars more wisely, rather than abandoning TV, either via better targeting, using less expensive dayparts, more cable, less broadcast, etc.Also, such an advertiser may be more wary about spending too much promoting stagnant brands and put the money to better use by increasing spending on brands with sales momentum.