Ad budgets set higher after PR cutbacks

What most marketers have suspected since October was yesterday confirmed – their advertising budgets matched their client sector’s confidence in the final months of 2010 by deteriorating.

In fact, despite an upturn in the forecast of WPP, the world’s largest marketing firm by revenue, the fourth quarter saw a higher proportion of marketers with cuts than with increases in their budgets.

The dip, which represents the steepest downgrade in about 12 months, was made more palatable by being less severe than those seen throughout 2009 and much of 2008, said industry group the IPA.

It was also unsurprising, added BDO, joint-author of the Bellwether Report, because the downward revision was an “attempt” by client companies “to preserve profitability and margins.”

The result has been felt the sharpest by the mainstream media, and by the organisers of below-the-line activities, such as PR and events, with no sector proving immune to the cut in ad spending.

Even the normally buoyant area of internet advertising had to settle for its smallest growth in six quarters, yet paid search was said to still generally provide brands with ‘minimised risks and more predictable returns.’

More positively, although confidence in their own marketing company or client sector abated between October and December of last year, marketers’ initial advertising budgets for 2011 have been scaled up.

Still, corporations will be both “flexible and cautious,” having signed off bigger budgets than actual spend in 2010, and are expected to keep a keen watch of consumer behaviour and the wider economy.

“[This] is unsurprising given the backdrop of continued public spending cuts and the threat of rising interest rates,” reflected BDO’s head of media Andy Vine.

However the outlook for 2011 has started positively as budget setting for this year looks set to be higher than actual spend for 2010 with particular strengths in internet and direct marketing.”

Accompanying IPA research adds that those client companies or brands which choose to “invest and maintain share of voice levels” should emerge in a stronger position in terms of market share and equity.

Such advice might be worth heeding in the UK, as the report implies a slower pace of growth in the advertising budgets at British companies compared with their counterparts in the US or emerging economies.

 

17th January 2011

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