What History Says About Media Budgeting and Recessions.June 17, 2022
Last week I wrote about the confluence between a recession and the pending loss of cookies. According to Google, they will sunset cookies now towards the end of 2023. That’s a full two years since the original cut-off date. While I suppose we appreciate the time Google’s given us to test new identity solutions, between now and then may be some of the more tumultuous times in marketing and advertising, including the COVID lockdowns of 2020.
In August of 2019, I was already preparing for what seemed to be a likely recession due to ongoing trade wars with China. (Actual footage exists.) Little did we know that a pandemic-level virus was beginning its wrath in Wuhan. So it wasn’t a trade war after all that put everything we do under a microscope, but something entirely different.
At that time, I made the prediction that a slow-down in the economy would begin the transfer of marketing and advertising dollars away from disconnected media (linear TV, terrestrial radio, and so on) to connected media, specifically programmatic TV. According to eMarketer, that is exactly what happened during the pandemic, and now, as we enter a potential recession, those trends continue. In fact, linear TV has “crossed the Rubicon,” says eMarketer, “Digital video ($76.20 billion) will attract more ad dollars than linear TV ($68.35 billion) for the first time in 2022.”
What’s Really Going on?
It’s tempting, as professionals, to say that the move towards connected media at any time is simply because we marketers are really smart and see trends ahead of others. Many marketers are indeed incredibly savvy and have the runway to make fast decisions. But when you look at the data, the lag by most marketers to stay atop actual consumer habits is quite large. The adoption of new technologies and platforms – a SMART TV or TikTok, for example – happens entirely first by the consumer then by marketers. The consumer drives attention away from older media as they migrate to new, more enjoyable tech and content. So perhaps it’s consumer behavior that drives the change.
But I’m not sure this is true either, especially in tough economic times. Of course, it’s true that consumers move media allegiances. But I’m not certain that they are the trigger point to changes in marketer behavior.
Having been both participant and witness to the past nearly 30 years of digital investments, my experience has that a recession driven reduction in marketing and advertising budgets, not consumer behaviors, are the true trigger points. Down markets drives intense pressures for marketing performance which drives faster adoption of new media channels because they are, at least, more measurable than traditional channels, and any marketing budget is essentially an investment thesis on the part of a CMO. When times are flyin’ high, there is less scrutiny over more direct marketing performance, and media efforts around “brand building” through mass media are generally more accepted as a simple “costs of doing business.”
But not now. And not in 2019. And not in 2009. And not in 2002. During each of these economic cycles, the growth in accountable media budgets skyrocketed even when the consumer was already within these channels. In 2002, the explosion of Google AdWords and search was coupled with a huge advancement in email marketing service providers like ExactTarget (now part of Salesforce Marketing Cloud) and others. In 2009, the market pivoted away from direct display media placements to programmatic advertising because the math nerds went nuts on all the unsold display advertising inventory, thereby launching the entire programmatic industry. In 2020 to today, digital video has exploded, not just on connected televisions, but on platforms like TikTok that hadn’t existed even three years ago. Today, as the largest video consumption platform in the world.
The CMO/CFO Partnership
During these incredibly uncertain times, a brand’s CFO’s absolute requirement of accountability will often trigger a change in a brand’s spend and investment behaviors over the consumer. The CMO is more likely required to report results to the CFO more frequently, with much better attribution, and locked into performance metrics whereby the CFO can determine if the investments are indeed yielding new revenue or other performance benchmarks. Of course, the data on performance should come from the CMO.
While I don’t disagree with this – I fully believe that marketing should be tied to business performance – I do get concerned when the innovation required to stay on top of the consumer in new media channels is beyond the understanding or experience of the CFO, CEO or other decision makers. And that’s to be expected; it’s not their jobs. For example, a recommended investment in TikTok may seem frivolous because it’s shiny and new. In order to receive approval for proper funding, the CMO will need to back their plans with third-party research, actionable data, and a keen understanding of their customer. They’re going to have to go into that boardroom armed with every defense, every data point, and an absolutely solid attribution story that ties together myriad channels into a cohesive investment strategy that reduces waste, increases attention share, and drives consumers through to conversion, whether online or offline.
I would love to say that the consumer is always in charge, but my experience is that during these types of economic cycles, money talks, and the CFO and others make the calls. And since we can’t dictate the fluency of non-marketing people towards consumer technology and media consumption, it all boils down to what all business people understand – money and performance.