The advertising industry has been undergoing a radical shift. The rise of artificial intelligence and the global economic slowdown has completely rearranged what marketers understand as business resulting in a lot of unpredictability.
Navigating Uncertainty Advertising Business
Executives in the advertising industry have stated that the sector is characterized by uncertainty especially due to the shifting economic landscape. “This is the first year in my career where I’m like: ‘I don’t know how this year ends’,” one executive said to the Financial Times.
Advertising rates have been low as companies have dramatically reduced their advertising budgets. The global economic strain has resulted in companies tightening their marketing allocations. Moreover, firms have also become keener on the expenditure of these funds applying more pressure on advertising groups to be more efficient.
A UK advertising director iterated that companies were looking for more value for their money saying, “You need to show the effectiveness of the work, to verify at every point and quantify, with budgets under so much scrutiny.”
Aside from low budgets, some companies are scrapping advertising campaigns altogether.
“Some projects are getting cut, some getting delayed, some waved through. It’s not going to be easy unless you’re counting on a big rebound in China. Which I don’t see,” he said.
Regardless, he remains optimistic and hopes that the industry will expand this year, though more slowly than in the years before.
Based on predictions by Group M, worldwide advertising sales are anticipated to rise by 5.9% to $874.5bn, that is excluding US political advertising. This rate is slower than the 6.4% increase last year and 24.8% in 2021.
According to Group M’s global president of business intelligence, Kate Scott-Dawkins, the industry benefited from increased spending among tech startups spurred by investor capital in 2019 prior to the pandemic.
Similarly, after the conclusion of the lockdowns, companies invested more in advertising which boosted the industry. “We’re coming down off of that, the cycle is at a point where we’re moderating and back to some sort of normalcy,” she asserted.
Therefore, while the rates seem to have oscillated too far from the other years, they will probably stabilize as the economy also recovers from the after-pandemic effect. According to Dan Clays, chief executive of Omnicom Media Group UK, the rest of the year should be better. Marketing budgets have proven to be broadly resilient in an inflationary economic environment as brands continue to pursue growth, he says.
AI Implication on Advertising
Another factor that has stirred the pot in advertising is AI. The 2023 Cannes Lions Advertising Festival has brought a lot of light into the marketing industry, especially in relation to this trending technology.
The event was focused on AI in advertising, how the technology will impact the industry in the longer term, and its opportunities and challenges. Unlike the economy, Group M believes that by the end of 2023, AI will contribute to at least half of all advertising income.
AI first came as a threat to advertising companies especially Google since users turned their queries to chatbots such as ChatGPT. This meant that the tech giant lost on the amount of times users spent on the platform search and in turn lost ad revenue.
However, with time, the company has chosen to integrate generative AI into its search engine to better search results and hopefully keep users on its platform resultantly increasing ads. Other companies have also sought ways to improve their service to clients through using AI.
For instance, advertisers are using AI to give life to initial ideas before they curate and finalize the last design. This saves a lot of time and breeds new ideas. Others are using AI to produce more customized designs based on users’ data so as target the audience better.
Unfortunately, it is not a secret that agencies are saving more time and money by using AI. As such, clients are considering revising billing methods to a per-hour basis which will also save them money.
Wondering how AI will affect the digital advertising market? Well, right now, while it's apparently helping boost revenue for Meta, it's also being used to syphon away revenue from publishers. I'm wondering if it could be a sign of things to come for market concentration pic.twitter.com/U7pLg08Crw
— Nick Botton (@NickBotton) May 2, 2023
While there are mixed feelings about how AI will impact the industry, one thing that is certain is that more original work will increase in value.
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