The challenge of inflation
As we exited 2021, one of the dominant themes in the media has been the return of inflation.
House prices, used car prices, grocery prices - all up. Black Friday saw headline discounts, but these were much smaller year-on-year, averaging only 12% vs the average 27% offered last year.
Inflation is now so prevalent across the globe that the FT are tracking it across multiple countries. Increased demand and reduced supply means higher prices for media
Price rises in 2022 are unavoidable. Media costs per thousand eyeballs increased in autumn 2021, and will increase, across all channels, again in 2022.
Prices for impressions in search, social, display, television, newspapers, OOH and radio will all rise year-on-year.
How worried should we be about this?
This is a major change for all marketers whose careers have lasted for 20 years or less. This is the first time that media inflation has been a factor when planning their investments.
However, there are two good reasons why this is an irritant rather than a cause for alarm.
The first reassurance is that inflation is pretty evenly spread across channels and audiences, so no individual client or sector should be disproportionately affected. This is important as the key metric for long-term market growth is share of voice.
The second reassurance is that (to date) consumers accept that they have to spend more as a result of rising prices, and that few of us are struggling with this as of now.
The graph below uses YouGov data from the end of November. Nearly 70% of adults report having to spend more day-to-day over the last three months, with, as yet, only 15% of us significantly impacted by that.
How can we mitigate the impact of inflation in 2022?
There is no one silver bullet that will magic away media inflation this year. However, there are a number of strategies that can be deployed across all channels and channel by channel.
A strategy for television
Inflation in television will be second only to that seen in social and search. Demand rose dramatically in the second half of 2021 - with revenue growth of more than 28% September - November 2021 vs 2019. That’s not just recovery against 2020 losses, but a great leap forward. Add to this the fall in commercial impressions as we all (pace Omnicom) go out again, and inflation could be running as high as 30% in 2022.
We recommend four actions you can take to enable the AV team to reduce the impact of these market forces on your investments this year.
Firstly: commit budgets early; the earlier the better and the more of the year you can commit the better. The last two years have enabled us to give great value for short-term commitments. This year the reverse is true. Early commitment will also help ensure your audience is delivered in the phasing and profile that will be most effective
for your campaigns.
Secondly: explore the trading options that are available through Barter partners; they can be used to gain price advantages with media owners and, depending on the nature of your business, bring other returns on your investment in the form of physical product or exchange of services.
Thirdly: as with print media owners, explore deeper partnerships beyond straight spot buys. Sponsorships, product placement, use of Zero party data, all enhance both value and effective returns from a TV investment.
Finally: this is the year to explore moving significant budget to VOD and CTV. These have come of age in terms of reach, volume of audiences offered, and data matching. Most importantly, the price differentials with linear TV have been eroded. This is particularly true of younger and more affluent audiences. Audience availability here means that VOD especially can be bought for a very small premium against 2021 linear TV prices. This may well be a value play in 2022.
All of the major broadcasters are working tirelessly and investing heavily in
their targeting opportunities: Sky’s AdSmart product can now be integrated with Sky VOD to provide ‘One Addressable’ campaigns. Using first-party advertiser data, combined with first-party audience data, and third-party data (i.e. DVLA, Boots, Mastercard), they can target niche segments of their audience, serving ads dynamically to promote specific messages.
All4 and ITV Hub are also building out their targeting capabilities, again using rich first-party audience data, combined with segmentation from third-party data suppliers. When combined with advertisers’ datasets, there are real opportunities to ensure you are targeting the right audience with the right message. Dynamically serving different ads, depending on location, the weather, current affairs etc., will offer more and more targeting options to increase the effectiveness of your advertising.
One further factor to consider for TV in 2022 is the wider effect sport will have. This is the first World Cup year where the tournament will not be held in the summer - instead starting on 21st November and running right up until one week before Christmas.
This is always a key period in the advertising year, so the question this year will be how do advertisers approach the combination of Christmas and the World Cup? Can they afford to plan away from the World Cup in the run-up to Christmas, or will they double down? Will this mean opportunities elsewhere – particularly over the summer where we normally see investment increase during a World Cup year? We may find the summer months offer some real respite from an inflated market if advertisers decide to push budget into Q4.
There is also the Six Nations Rugby tournament on ITV in February/March, potentially furthering the likelihood of a decrease in spend among particular sectors over the following summer
months.
Key takeaways:
1. Media is going to be more expensive in 2022, significantly so.
2. If you stop spending, you are at risk of losing share of voice, and thus share of market. We are seeing our most successful clients (and equally their most successful competitors) increase their media investments as consumers continue to spend and absorb price rises.
3. There are steps you can take to mitigate inflation on a channel by channel basis, but when it comes to TV we should certainly be thinking about:
i. Acting earlier and planning ahead – particularly when sport and other external factors may change the usual shape of the advertising calendar.
ii. Exploring trading options and media owner partnerships to extract more value.
iii. Taking advantage of increasing tech and targeting capabilities to reach your audience more efficiently.
Eloise Pates
Contributor
