What economic uncertainty may mean for the media and advertising industry in 2023
Economic uncertainties are likely to impact many aspects of our lives in 2023. There are consistent signs of a potential recession ahead; job instability, market volatility, the rising price of goods and services, and supply chain challenges continue to be common themes in the news. The advertising and marketing industry is no exception to the impact of the macroeconomic climate. The CMA Media Council recently had a focused discussion on how current economic uncertainty is impacting many facets of the media landscape – from the consumer to advertisers, agencies, and media owners.
Historically in times of economic downturn, we have seen ad spending fall dramatically initially but then have a strong recovery. This was the case through the Great Depression (1930s), the Dot Com Bubble (early 2000s), The Great Recession (2008-2009), and the COVID-19 pandemic (2020 onwards). The amount of time it took to recover varied, but what is consistent is that at times of uncertainty, expenses are often cut. And marketing and media are still often seen as an expense, leading to declines in ad spending. Given this, what do we expect to see from consumers, agencies, advertisers, and sell-side media owners?
What should we expect from the consumer?
With the many pressures on disposable income, consumers are feeling the squeeze and trying to cut back on discretionary spending where they can, either by trading down where options exist or delaying upgrades and purchases of non-essential items. From a media perspective, this could further accelerate current trends like cord-cutting and potentially slow growth in other channels like streaming subscriptions. The slow, steady decline of linear TV continues, with only 61 per cent of Canadians now saying they subscribe to cable or satellite, according to the Angus Reid Institute. Two in five customers say they are likely to cancel their TV subscription, and 77 per cent feel their subscription is too expensive. Streaming services aren’t immune either and are already feeling the impact of consumers’ financial pressures, with one in three Canadians having cancelled at least one service in the last six months, and over half stating that saving and affordability is a key reason. Changes in consumer behaviour will necessitate changes further up the chain as they adapt to the new reality.
What should we expect from the buy-side of agencies and advertisers?
Similar to what we anticipate from consumers, the industry should expect to see tightening expectations from the buy-side. It may mean tightening of budgets, but it could also mean greater overall expectations on value and efficiency from their budgets. The buy-side will continue to encourage and require measurement as a fundamental part of their marketing efforts. Marketing campaigns may consolidate messages and product variants, resulting in fewer promotional sales periods. Paid search dollars may shift to other media such as retail media and video. Advertisers will expect to see greater collaboration and reporting measurement from their agency partners, as they try to get maximum impact from every dollar they spend. Pressure on agency fees and non-working spend may also intensify.
What should we expect from media owners and platforms?
With increased pressure on the industry, advertisers may then look for price efficiencies from media owners and platforms. Providing incremental value, fluidity, the ability to adapt and change campaigns in-flight, and close-to-air sales rather than long-term and upfront commitments may become customary. Publishers could seek different placement types and effective use (and re-use) of video and audio assets. The shift from traditional media to digital media is expected to continue and media owners and platforms may be expected to provide flexibility in the media mix. Linear TV networks may use multiple media channels to potentially offset challenges in another. With the influx of advertising-based video on demand (AVOD) inventory in 2023, digital video options are high and CPMs may be flat or see decreases before increases. Additional granularity in reporting measured audiences and engagement will be expected. As well, there may be greater collaboration among media owners and platforms to work with measurement providers to provide unduplicated cross-platform measurement.
Only time will tell what the impact of the current macroeconomic environment will be on the media landscape in Canada. Whatever happens, it will be important to remember that the industry has gone through similar challenges in the past and has recovered in strength. The most successful will continue to learn and adapt to the changes, finding efficiencies and bringing value across all facets and stakeholders.
Julie Unsworth, Sr. Director, Seasonal & Corporate Marketing, Walmart Canada
Darrick Li, VP Sales, North America, Standard Media Index