Three trends disrupting the marketing and advertising industry

• The economic uncertainty that has dominated news cycles for the past few months is taking its toll on the advertising industry.
• We look at three key factors influencing advertising’s rocky outlook for 2022.
• Do you work in the Advertising, Media, and Marketing industry? Gain business insights into the latest tech innovations, market trends, and your competitors using data-driven research.

By the end of 2021, the effects of the pandemic are receding, stock markets are booming, and digital acceleration is moving at full speed. Today, the future looks unpredictable. Rising inflation, the threat of recession, the war in Ukraine, and ongoing supply chain challenges are reshaping the purchase journey, and subsequently, the way businesses interact with their consumers.

Tech giants, ad agencies, and brands are bracing for an industry-wide slowdown—but it’s unclear how severe it will be. Drawing on insights and statistics from Insider Intelligence’s latest report series, “The Era of Uncertainty,” we explore three key factors influencing the advertising and marketing industry as it prepares for a rocky H2.

Accelerated inflation is causing consumers to reevaluate their spending. While we expect US consumer spending to continue despite the rising cost of goods—with retail sales set to grow 6.4% this year, mainly due to inflation—a closer look at Shopping and purchasing habits tell a more nuanced story.

The loss of spending power is forcing consumers to make tougher choices about what and how they buy, especially when it comes to non-essential and luxury items. Spending on durable goods fell 3.2%, as consumers pulled back from big-ticket items like appliances. In addition, to cover costs, consumers are increasingly tapping into savings. The savings rate rose to 5.4% after falling to 5.2% in April, its lowest level in more than a decade.

Even Amazon has felt the effects of inflation. Although Prime Day 2022 was Amazon’s biggest yet—with total US online spending reaching $11.90 billion, up 8.5% year-over-year (YoY)—the higher prices had a clear impact. -influence consumers’ purchasing decisions. Shoppers gravitated toward deals on essentials versus last year’s more frivolous top sellers: health and beauty and consumer electronics.

“These buying trends and insights will be an important signal for advertisers looking to adjust their spending. If consumer spending continues to lose momentum over the next few months, it suggests there is no market to support current levels of ad spending,” said Peter Newman, senior forecasting analyst at Insider Intelligence.

The economic turn has only worsened the rocky relationship between Big Tech and advertisers.

Big Tech’s advertising perspective has been strained by sweeping privacy changes, such as Apple’s AppTrackingTransparency policy (ATT). Under the ATT, all apps distributed through the App Store must prompt users to opt in and allow advertisers to track them on other sites or apps. The launch of ATT in April 2021 effectively removed the primary way publishers and advertisers tracked users on iOS and changed how the mobile ad industry approaches monetization and measurement.

As a result, advertisers no longer receive information about off-platform actions, making it difficult to effectively target ads, track engagement, and measure conversions. In fact, Meta said the changes could cost as much as $10 billion by 2022, and its failure to create a reliable replacement has caused advertisers to flee Facebook. That’s also why Insider Intelligence predicts that Meta will see the lowest annual growth rate of ad revenues, increasing by just 12.4%.

Facebook isn’t the only platform that will be hit hard. Snap said it would beat its Q2 revenue goals, undercutting the stocks of other ad-reliant social media giants. Following this announcement there was a domino effect of layoffs, hiring freezes, and abandonment of new projects throughout the industry.

Now, more than a year after Apple’s privacy changes, companies are still struggling to develop ad solutions, and revenues are down significantly. Fortunately, advertisers using Facebook and Instagram are in a stronger negotiating position than ever before. Meta will fight hard to keep its advertisers in the fold, but there’s no better time than now for marketers to spread their social budgets across other platforms—especially as TikTok comes knocking with new ad products focused on performance.

Besides social channels, there are still some proven, growing sectors for ad dollars to move to. US search spending will increase 14.5% this year to approximately $99 billion. More direct channels have proven robust. Email marketing remains a powerful tool for marketers to build personal relationships with consumers and increase the effectiveness of their campaigns at a time when other channels are plagued by uncertainty.

Tech’s woes are only a small part of the overall downfall of the ad industry. Layoffs have hit some ad agencies, and major advertisers are starting to rein in spending.

With the US economy adding 390,000 jobs in May this year, the nation’s job outlook is generally positive. However, during the same period, advertising and public relations still lost 2,400 jobs, according to the US Bureau of Labor Statistics. It was the first job decline in the advertising industry since November 2020, a sign that the boom brought on by the pandemic is slowing.

“The increase in interest rates from the Federal Reserve has coincided with falling stock prices, especially in the tech sector,” Newman said. “The cuts may include a reduced advertising budget. So far, most of the cuts seem to be in future speculative ventures or overcapacity from the pandemic, not in ad budgets, which could have a direct line to revenues.”

Other industries simply move dollars around. Automakers, for example, are investing more in consumer experience and loyalty programs than in advertising, after seeing shrinking revenues from TV placements in H1 2022. Microsoft has also halted TV spending ad last month, citing inflation and interest rates.

Upper-funnel campaigns such as connected TV (CTV), which previously benefited from the pandemic-driven trend toward streaming, have seen some of the biggest budget cuts. It comes, however, amid criticism of accuracy, with the recent finding that 17% of ads on CTV devices are shown while TVs are off, costing advertisers $1 billion. If the unstable economic outlook continues, ad channels that have already had issues—like CTV—will be hit harder, as marketers look to put their tighter wallets to use on more reliable sources.