January 25, 2023
Half Of Ad Execs Say Ad Spending 'Hit Bottom' In April, Others See Recession Continuing
- by Joe Mandese @mp_joemandese, May 11, 2020
If there is a "bottom" to the rollback of ad spending during the COVID-19 pandemic, it probably hasn't come yet for about half of ad executives. That's the finding of a report published by equities research firm Pivotal Research Group, based on surveys it conducts with the ad industry.
Noting that its sample likely skews toward agency respondents and under-represents advertisers who don't work with agencies, Pivotal notes: "While we see reasons to believe that April is the bottom (51% of PAI respondents thought so), we don’t see signs of a sharp recovery."
Pivotal analyst Michael Levine, however, says both analysts and investors initially were too negative on the impact for media companies dependent on advertising, especially big digital platforms such as Facebook and Google that nonetheless turned in better-than-expected first quarter earnings results.
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Pivotal's data seems to support findings of a recent survey of ad executives conducted by Advertiser Perceptions that indicated the ad industry is in fact nearing bottom, and that a full-blown ad recovery would likely begin in the third quarter of this year.
Meanwhile, the Pivotal data reveals another negative side of the crisis for ad agencies, with 50% reporting clients have made cuts to their agency fees during the pandemic.
About two-thirds indicated those cuts have been roughly "in line" with overall cuts
in marketing budgets, while 15% each said it was greater or less than those cuts.
2 comments about "Half Of Ad Execs Say Ad Spending 'Hit Bottom' In April, Others See Recession Continuing".
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A few key elements that are missing is that while the study admits it likely oversamples agencies, that oversample is likely with large national shops and little to no insight or consideration to local and regional brands. We've already seen reports and trends that show national brands shifting more budgets to local media, often time being able to do more with less. Targeting the most critical markets in a time of need while minimizing the waste of a national buy, and so it appears dollars are down and not just refocused. The more disturbing thing is that agencies are lowering fees. This makes no sense to me. If anything agencies should be proving just how valueable they are as a partner and being ready to ask for higher fees in the next scope/contract negotiation. Or perhaps you didnt price yourself correctly in the first place and now your clients are going to take full advantage.
@Eric Nelson: Pivotal noted that it's sample was not necessarily representative of the entire marketplace, and we reported that:
"Noting that its sample likely skews toward agency respondents and under-represents advertisers who don't work with agencies."