Home Newswire Advertising spend is an investment, not a cost

Advertising spend is an investment, not a cost

During the Future of Media event last month, Dara Nasr (MD, Twitter), Bhavesh Patel (Head of Media – UK and Europe, Sky), Beth Freedman (CEO, Dentsu), and Karen Stacey (CEO, Digital Cinema Media), sat down with Greg Grimmer (CEO, Mediatel Group) to discuss how the pandemic affected advertising, the bounce back of the ad trade, and the imperative of understanding advertising as an investment, not a cost.

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Last month, during the Future of Media event in London, Dara Nasr (MD, Twitter – the social media platform), Bhavesh Patel (Head of Media in the UK and Europe, Sky – the broadcasting and telecommunications giant), Beth Freedman (CEO, Dentsu – an international advertising and public relations company), and Karen Stacey (CEO, Digital Cinema Media – an advertising company supplying cinema ads to Cineworld, Odeon and Vue), sat down to discuss changes in the advertising landscape spurred on by the pandemic, and how marketers have responded to challenges and opportunities in this new era of business and media.

The conversation began with a reflection on how the pandemic affected brands and the advertising trade. Patel emphasised the deficit of initial insight which could help brands navigate uncharted territory. He said: “I think the pandemic for many clients was tough, and rightly so. You didn’t know whether to stick or twist. There was little to no insight into how you deal with spending during a crisis.” Freedman highlighted the difficulties facing certain brands, when greater ad spend could not translate into increased sales in the short-term. Automotive manufacturers, for example, faced the dilemma of needing to maintain their brand, but simultaneously, retailers were closed, customers could not test-drive vehicles, and consequently, ad spend would have little effect on car sales. She posed an important question: what do marketers do when they can’t simply spend in order to sell product?

Happily, the plummeting of ad spend appeared to have been a short-term phenomenon. Grimmer referenced the recent WARC report that showed strong recovery for the UK ad trade, with spending on advertising reaching £7.7B in Q2 2021 – an increase of 86.5% from the previous year. He asked the panelists what factors they believed drove this remarkable bounce back. Nasr said that, while spending on Twitter by media buyers in Q2 2020 took a nosedive, the recovery was much quicker than he had anticipated.

One reason for this was brands’ greater access to information, insight, data and established econometric tools. This gave advertisers more confidence to spend, as well as time to test and experiment with advertising strategies in new market conditions. Another factor was the trade’s dawning realisation that there did not appear to be an end to the pandemic in sight, and no one was sure when the global economy would return to a state of normality.

Patel echoed this point, speculating that a greater number of companies understood that constricting their marketing budgets would have long-term detrimental effects on brand health. In the case of Sky Broadband, he said, “We haven’t been on brand for a year, so we knew if we continued, it would be a big problem.” Freedman recalled how the “fear of silence” became felt acutely not only by marketers, but the C-suite, who recognised that while savings could be achieved easily by cutting ad spend, the performance of their brands in the long term might be endangered.

Aside from the fear of silence, Patel explained that ad spend increased partly because the media cash that brands would have usually spent, but had saved instead, was released into the market as the pandemic progressed, and media buyers had access to lower entry points. He also praised marketing teams for building the case that ad spend during a crisis, when other brands are more reluctant to invest, gives initiative-taking brands a disproportionate share of voice in the market.

The view that advertising is an investment and not a cost was perhaps put most emphatically by Stacey, especially in the case of brands who are not only attempting to secure market share, but also to create a market from scratch. She said, “We should be arguing with FDs [Finance Directors] that the amount of money spent on advertising launch should be discounted over a certain amount of years like any CapEx. That’s a job for all of us.”

In October  last year, Nielsen – a data and market measurement firm – released a report estimating that, on average, it takes companies three to five years to recover equity lost because of halted advertising, and long-term revenue can drop 2% for every quarter a brand continues to stay silent.

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