Analysts at investment bank Jefferies recently held a meeting with an unnamed advertising agency with an $800 million to $900 million digital ad budget.
The US agency's clients are Fortune 1,000 advertisers running brand and direct response ad campaigns, with Meta and Google making up 40% of client budget.
A key takeaway from the meeting: Advertisers are being more cautious with their ad spend in 2023.
For some, the global pull back in digital advertising, with a subsequent slashing of overheads including staff, is a worry.
The global advertising agencies are forecasting growth this year, despite limited visibility of an economy being hit by rising inflation, galloping interest rates and falling consumer confidence.
But that rate of growth is slowing after a stellar year in 2022 and few are willing to give precise guidance.
In Australia, industry insiders see a dip in, but not an end to, growth in 2023. The SMI (Standard Media Index) put overall ad spend down 10% in January.
Other investment banks have been talking about a "tougher" economic conditions (UBS) and declining digital advertising as the macro backdrop continues to "soften" (Macquarie).
Over at WPP, the world's biggest advertising holding company, CEO Mark Read has a positive view, not just for his own global advertising business, but for the sector as a whole.
The world’s biggest advertising agency has a 3% to 5% organic growth rate outlook for 2023, softer than 2022’s actual of 6.7% but still significant.
“We have good guidance in '23 on the back of a good year in '22 and a good year in '21,” he said when briefing analysts. “There's a positive outlook for our industry.”
Read says that outlook is based on budgets, which are put together on a detailed bottom-up view of what each of the company’s agencies report on conversations with clients.
“I think they're also supported by the conversations we have at a senior level with clients and what you understand clients want to do,” Read told analysts.
“I think at the end of last year clients were more confident in private than they were in public.
“So, when I talk to CEOs, they're a lot more positive than they would have been if they appeared on Bloomberg or CNBC about the outlook for the year, because I think everyone was rightly cautious.
“The general view is the world economy is in a better place today than when people feared it would be back in October and November.
“Clients understand the value of investing. And if you're the CEO of a company, you're looking at, let's say, an FMCG company ... volume is down 2%, price is up, say, 7%, total revenue up 5%, you're probably not going to cut your spend.
“You're probably going to continue to invest in marketing to support the price increases, to support your revenue.
“Broadly speaking, it's a positive environment for companies to continue to invest. I do think that consumers continue to spend.
“If there's a catastrophe this year, then things change. But … I don't think this year is going to be a catastrophe. And yes, I still have that view.
“There will be a slightly softer landing. It may take somewhat longer. Interest rates and inflation tend to fight against each other. If inflation goes up, so does interest rates.
Read says WPP has a healthy new business pipeline.
“I think a lot of clients are looking at our work and our partnership with the Coca-Cola Company trying to understand how relevant that is for them, what are the benefits of really working with a partner who can help them transform their business and transform their marketing, help them deliver better work, and at the time, save money.
“I think that's quite an attractive proposition to a large number of major clients who are in some cases struggling with thousands and thousands of agency partners. And I expect that to continue this year.”
Read says the business environment is increasing in complexity, but that there are also new opportunities for clients.
“We're operating in a more competitive media environment,” he says.
“New platforms like TikTok growing, YouTube launching shorts, Meta launching Instagram Reels, WeChat taking search advertising for the first time.
“More choices for clients. It's a more competitive media technology and data driven, so they need more analytics, they need more media savvy. They also need new creative opportunities.
“And all this complexity is driving new for clients. And I think there's new opportunities to advertise on platforms like Netflix or to invest behind TikTok. And all of these channels need new content and types of content from other channels. new ideas, and quite often, different
“So that's leading our clients to look much more fundamentally at their investments and whereas perhaps four, five years ago, they looked at television advertising. Today, they're faced with how much they should spend there, a plethora of choice.
“And some of the questions we've had around the growth of the platforms, so the platforms disintermediate WPP. My view is they empower us. They empower our people to do different and better types of work, and they empower us to grow if we do our job correctly, and that ultimately is the critical point."
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.