'New Economy' Brands First To Cut Back Due To Headwinds In Actual Economy

The “new economy” advertising sector is the one feeling the biggest pinch from the trend of the general economy. That’s the consensus of a panel of ad industry experts queried by Wall Street securities analyst at BMO Capital Markets.

“Ad budget cuts are being led by former emerging categories that have run into massive headwinds owing to changes in consumer behavior and the funding environment,” BMO’s Daniel Salmon writes in a report sent to investors this morning.

While they did not cite explicit brands and/or categories, Salmon says: “Several speakers agreed that weakness is most acute in the area of direct-to-consumer (D2C) retail, VC-backed startups and cryptocurrencies.”

The panel also singled out social media app Snap as having “broader exposure” among those advertisers, “with one potential saving grace for incumbents being potential regulatory headwinds against TikTok.”

The note concludes that initial ad budget cutbacks have been focused on:

  • Branding/upper funnel efforts relative to their direct response/bottom of the funnel tactics.
  • Lower scale ad sellers (i.e., maybe third, fourth, fifth players in a category) will suffer more.

“While total budgets are coming down, everyone agreed that more data-driven media would see share gains in a downturn,” Salmon concludes, adding, “Search/product listing ads and connected TV were highlighted in particular.”

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