WARC’s Trillion dollar ad spend forecast – industry comment

Despite the current economic turbulence, the global advertising market is set to pass the trillion dollar market for the first time in the coming year, driven by the biggest players in the social media and e-commerce sectors.

This is how WARC’s latest ad spend report, published last week, sees the near term future, as the world reels from nearly two years of excessive inflation, energy price hikes and growing pressure on the consumer.

So, what do those at the leading edge of the advertising and adtech sectors have to say about that trillion dollar prediction?…

amy-wright-automated-creativeAmy Wright, Global Head of Creative Strategy, Automated Creative

Adland has experienced a tough few years, with the pandemic creating a difficult run for both industry and consumers.

And, just as we crawled clear of Covid, the cost of living crisis hit, putting marketing budgets and household spends under pressure everywhere.

Media money is beginning to flow again – albeit slowly in Europe – and social is the channel continuing to drive much of this growth, with spend rising to a total of $227.2bn next year.

The key, moving forward, will be for brands to look for ways to advertise efficiently through raising creative effectiveness while providing the best ad experiences for consumers in a privacy-first way.

Richard Parsons, True.

Richard Parsons, Founding Partner, True

The dominance of global advertising’s big five players means that these companies have more power and can raise their rates.

In comparison, it’s hard to see how smaller networks and publishers can compete without the same resources in terms of audience reach and the delivery of effective campaigns.

The increase in global spend looks like good news, but for the UK, predicting a dip is a reality check. Slower growth of advertising spend in the UK could be a part of its economic weakness.

But this should be a time when advertisers are investing to get ahead of competition, especially as CPMs normally fall during a downturn.

With those two less cheerful aspects of the report in mind, there is some good news in CTV increasing its share of spend.

As a B2B media specialist, we’re seeing connected TV really taking off for our clients across sectors and when the financial market is stormy, it’s great to have that break in the clouds.

Piero-PavonePiero Pavone, CEO, Preciso

The rise of retail media is no surprise to us, and there is also nothing unexpected in the fact that Amazon sits at the centre of this trend, but the size of its share does emphasise the importance for tools that benefit smaller retailers who wish to operate outside Amazon’s shadow – for instance, Shopify merchants.

As the big get bigger, small retailers need to be aware of the sheer power at those companies’ disposal; they need to do what they can to maximise their customer data, retain customer loyalty and optimise campaigns around their own products and stores, in order to ensure that retail media isn’t simply dominated by those with the greatest resources.

Ian-Liddicoat-AdludioIan Liddicoat, CTO and Head of Data Science Adludio

Expected to rise by 7.6% in 2024, the bounceback of the US ad market is clear to see in the latest report from WARC.

While persistently high inflation in the UK meant that a drop in ad spend was perhaps unavoidable, brands here must not forget the importance of maintaining ad spend through difficult times.

Indeed, it will serve them well in maximising the opportunity of the recovery once it comes.

AI has been our industry’s lightning rod in 2023, injecting a new-found optimism after several years of crises.

It will be a particular game-changer when it is applied in the optimisation of digital creative on the buoyant performance channels quoted by WARC’s report (Social, Search and Display especially).

Global marketers who have used the past year effectively to embrace and integrate AI-based technologies in this arena are in a strong position.

Having analysed to a granular degree how, where and when users have engaged with their campaigns, brands with this wealth of creative intelligence know exactly what ad iterations work with their customers.

Marketing teams who meanwhile have yet to explore AI’s power will soon be left behind.

Nadia Gonzalez, ScibidsNadia Gonzalez, Chief Marketing Officer, Scibids

While the outlook varies across markets, the fact that ad spend has hit the $1 trillion mark reflects a renewed confidence from brands in their budgets’ ability to drive business outcomes.

With half of ad spend still going towards the Walled Gardens, however, brands should make the most of the upswing to investigate opportunities on the Open Web.

Strengthened by the growing popularity of AI, this technology promises a new era of digital efficiency with the activation of proprietary and measurement data outside of the Walled Gardens.

Offering a lot of use cases and adaptable to fit the specific needs of brands, customisable AI in particular is unlocking a new level of growth and scale for businesses.

Philip-Acton-adformPhilip Acton, UK Country Manager at Adform

With persistently high inflation in the UK, the WARC report’s projected dip in market ad spend is unsurprising. During this time, brands not only need to be meticulous, they need to ensure they are working with partners that can extract the most value from their budgets.

The objectives here should be two-fold. Brands should be leveraging solutions that can continue to target relevant audiences following the imminent deprecation of third-party cookies.

They should also facilitate omni-channel campaign execution, including Connected TV environments. Indeed, it is clear that this will be a particularly  key channel for brands in 2024, with the WARC report indicating a growth of 12.1% next year.

Julia Bielecka-Dąbrowska (1)Julia Bielecka-Dąbrowska, Head of Sales Development & Efficiency, RTB House

Given ongoing economic spending has been impacting the industry hugely over the last year, the fact that advertising spend across the globe is still on the rise, with a few exceptions, should leave marketers feeling positive about the year ahead.

As ad spending goes over $1.trn, brands must use the opportunity to engage with customers as effectively as possible if we want to continue to drive this upward trajectory.

AI, in particular Deep Learning, will play an important role in future campaigns across the industry. Brands utilising this technology will be able to capitalise on hyper-targeted, tailored advertising that reflects client needs wherever possible, above and beyond what human capabilities.

With the cost of advertising on the rise, budgets are being increasingly squeezed. In order to spend little but succeed in the long run, brands should continue to look for ways to maximise the possibilities within advertising through AI.

Thomas-IvesThomas Ives, Co-Founder and Director, RAAS Lab

The most recent WARC report indicates a decline in the UK advertising market, likely attributed to the ongoing issue of high inflation. During these tricky economic times, budget efficiency must be a heightened focus for brands.

Employing AI to enhance budget has emerged as a favourable strategy for cutting down ad wastage.

By utilising advanced technology, brands can evaluate optimally performing creative and identify the most relevant digital platforms for specific consumer audiences.

This empowers brands to increase budget efficiencies through better targeting resources, while simultaneously minimising spend on ineffective ads. In turn, securing the long-term sustainability of advertising efforts in an ever more competitive market.

Graham-TrickerGraham Tricker, VP Sales UK, LiveRamp

The findings of the most recent WARC report align with our recent research on the priorities of senior UK marketers during Q2 2023. In particular, the paramount status of retail media amongst brands currently.

The report shows that retail media is set to rise by 10.2% in 2023 and a further 10.5% in 2024, totalling $141.7bn.

This surge in retail media spend underscores the escalating influence of data collaboration – that is, bringing together data from internal and external sources to unlock valuable insights.

Noting that the report projected the UK ad market to dip, likely due to persistently high inflation, marketers must not forget the importance of maintaining ad budgets through a crisis.

Indeed, previous experience has shown those that prioritise their marketing spend during difficult times emerge stronger.

Those brands who are investing in retail media, and other strategic partnerships underscored by data collaboration, will be in a prime position to optimise their marketing strategies based on the comprehensive insights these partnerships provide.

Marketers who have not yet started to align their organisations in collaborating internally and with data partners,  must act now or face falling behind.

Andra-Mititelu-permutiveAndra Mititelu, Business Director, Audience Platform for Advertisers, Permutive

It is encouraging to see that ad spend has risen 4.4% this year, and that expenditure is on track to top $1trn for the first time ever.

However, given the economic challenges affecting the UK, it is unsurprising that the nation is seeing a 1% dip.

With addressability in the open marketplace (OMP) at just 30%, prioritising spending where it is most effective will be a major focus for the next year.

Advertisers seeking to grow their market share must stop spending 90% of their budget to reach 30%, and focus on the remaining 70% of consumers.

“Working in a more direct capacity with publishers, at scale, will be key to opening up these audiences for advertisers, maintaining transparency and control, and ensuring that the premium inventory they can’t find in the OMP is fully accessible.

Five companies, not including Google, capitalise on over half of ad spend already. Adding Google into the mix, plus other large social platforms, we get a monopoly of over 80% of ad spend being controlled by a few companies.

Advertisers must evaluate their reach, the quality of their placements, and whether they effectively reach target audiences where they spend their time.”

Sean-Adams.jpegSean Adams, Global Insight Director, Brand Metrics

We were pleased to see WARC’s predicted growth in ad spend over the next two years, but also noted a couple of areas of concern to us as major supporters of premium publishers; first, the continued budget dominance of the big five platforms; and secondly, the growth in performance-based channels.

Within the overall advertising ecosystem, we believe in the importance of premium publishers and hope to see them continue to justify their role and attract a greater share of future ad spend.

One key element of that ambition will be their ability to prove the effect of advertising on their platforms, especially when it comes to brand-building activity, rather than just performance-based activity.

However, in the absence of consistent campaign measurement of key brand metrics, ad spend may continue to favour more “accountable” alternatives, thereby placing further commercial pressure on publishers.

We hope that the predicted future growth in ad spend will also see a growth in publishers measuring its effect.

gareth-holmes-seen-thisGareth Holmes, Vice President Commercial Strategy & Media, SeenThis

The latest WARC report shows as an industry we are due to grow 4.4% this year, stretching to a lofty, and comfortably positive, 8.2% in 2024.

Unsurprisingly they are forecasting just over 50% of this will drop into Alphabet, Meta and the usual assortment of global one-click-purchase and social-focused platforms.

The report states that performance channels will see the largest upside, as most buyers seek to divine more from less, or the same, as some belts have been tightened.

But with outcome-based advertising a must-have, we will see brands and their agencies looking to achieve the triumvirate of outcomes – better ROAS, measurable performance and commercially viable sustainability solutions – so we can expect all of those to come more to the fore.

All in all, in today’s economic climate, this is a positive WARC report if you are a purveyor of technology which enables those three pillars of scalable advertising.