CTV and digital video are victims of the effects of inflation on marketing budgets

Diving brief:

  • One in five marketers surveyed by Advertiser Perceptions cut their budget in the face of rising inflation. Budgets fell, on average, by 16%, according to findings the company shared in an email with Marketing Dive.
  • The cuts were most apparent in upper-funnel channels, with 47% pausing connected television (CTV), 44% digital video and 42% linear TV. Low-funnel spending areas, including paid search, print, radio and addressable television, were the least affected.
  • Four in five respondents plan to relaunch their budgets by the end of the fourth quarter, but the tactics will change. Advertiser perceptions predict that half will change their messaging strategy, while first-party data will take higher priority as marketers focus on retaining old and existing customers rather than capturing new ones.

Overview of the dive:

The latest findings from Advertiser Perceptions usher in a calmer period for marketing as brands try to make their money work, though savvy leaders may have a window to usher in creative innovation. The company interviewed 300 advertisers at the end of April to glean its ideas.

The short-term picture is not pretty, with three-quarters of respondents feeling a negative impact on their business. Inflation has not shaken all sectors of industry in the same way. While 90% of packaged goods and retail merchants have been impacted by rising consumer prices, only 42% have reconsidered their messaging strategy. This contrasts with the 70% of apparel and fashion marketers and 56% of financial marketers who did.

Macroeconomic conditions have deteriorated since the spring when the research was launched, suggesting that the trends identified in the report may actually be more acute today. Inflation jumped 9.1% year-on-year in June, according to the latest data from the Bureau of Labor Statistics, beating economists’ forecasts. reached its highest level in more than 40 years.

The result is that many marketers are eliminating costly upper funnel activities that play an important role in brand building. CTV and digital video — former benefactors of the pandemic-induced transition to streaming and social media — have felt the dampening effect. Thirty percent of respondents said they would reopen CTV taps once inflationary signals fade, although the June snapshot indicates that time may not be near.

Meanwhile, low-funnel marketing took advantage of the volatile environment. Marketers have flocked to performance-driven tactics like retail media to try to tie their efforts closer to last-click results. Advertiser Perceptions expects the retail media boom to continue, supported by the current inventory overload that is pushing more traders to hold closing sales.

Flying away from the upper funnel also opens up opportunities. Digital video now has less competition and lower advertiser density, which means marketers could get more out of their campaigns in the channel, based on advertiser perceptions.

Even if marketing activity rebounds in 2022 — and it looks like Q4 and the holidays could see a spike — messaging is poised to scale. The imminent death of the third-party cookie gives pride of place to media enriched by first-party data. Given this, it might be easier for brands to target consumers with whom they have an existing relationship rather than jumping through hoops to acquire information about new consumers in a tighter privacy landscape. This scenario could, in turn, lead to more substantial brand building after a relatively dry period for exceptional creatives.

“Media with first-party data can make the strongest case for upper funnel or brand advertising, especially where it becomes cheaper than performance channels,” said Nicole Perrin, vice president of economic intelligence at Advertiser Perceptions, in a press release. “It’s a huge opportunity where it’s all about context and audience rather than clicks.”