Ad Market Is Poised for Rebound
More than 35% of large and medium sized companies surveyed say they intend to increase their marketing budgets in the coming year, vs. to just 10.8% a year ago.
The advertising industry seems geared to bounce back in 2013 from a persistent downhill slide in corporate ad budgets in recent years.
Among 42 marketing managers of large and medium-sized companies surveyed, 35.7% said they intend to increase their marketing budgets in the coming year, as opposed to just 10.8% a year ago, according to a survey conducted by the market research firm C.I. Marketing Information, which is headed by Merav Shapira and Noam Raz.
The survey was prepared for TheMarker and the Israel Marketing Association in advance of the association's conference tomorrow.
Last year, 35.4% of respondents said they intended in 2012 to cut their overall marketing expenditures, which include advertising, public relations, sales promotions and market research, while 43.1% said they expected no change from the previous year.
In fact, 2012 turned out to be another gloomy year for the advertising industry and the media that feed off it, dropping off 7.2% according to Ifat Advertising Monitoring.
This time around, 40.5% of survey participants said their budgets would stay unchanged from 2012 and 23.8% still expect their budgets to shrink - though by a far smaller percentage than a year ago. Optimism remains decidedly cautious, however: The survey has a 13.6% margin of error.
Asked specifically about their ad campaign budgets, 28.6% said they would increase in 2013, compared with 10.8% who said they would stay the same as last year, while 23.8% said they would decrease - much less than the 30.8% who gave the same answer at the beginning of 2012. In fact, 2012 turned out to be another gloomy year for the advertising industry, with a year-over-year decrease of 7.2% according to Ifat Advertising Monitoring.
"Despite expectations of a recession and harsh government economic decrees, the survey points to an optimistic outlook," says Raz. "More specifically, though, marketing managers expect the budget breakdown to change. Traditional advertising will give way to less direct advertising activity on social networks, public relations and marketing content."
The survey also explained where all the unused advertising budgets disappeared to in 2012. Half the companies admitted leaving part of the budget untouched in 2012, as opposed to 38.5% in 2011.
Social networks star
After a year of confusion and looking for a sure way to reach consumers, marketers intend to implement several changes in how they allocate their budgets in 2013.
One of the main changes made over the past few years has been broadening activity in new media. Many companies have already set up departments within their organizations to represent them on social networks.
In the C.I. Marketing survey, 28.6% of marketing managers said they intend to increase expenditures in this area, while 5% actually said they plan to cut back.
But there are other fields besides online where budget allocation changes are planned, with nearly 50% of respondents saying they'll be juggling the mix. Most will be putting more emphasis on digital media, but 12% said they'll also put more into direct activities like sales promotions, compared with 5% who replied they'll be reducing such activity. There also seems to be a move toward investing more in public relations.
On the other hand, overall expenditures for traditional advertising through mass media are expected to shrink. Among the 50% who intend to change their marketing mix, 26% said advertising will take a narrower slice of the pie than last year and only 7% said it will increase.
In 2012, the effect of the protests was still being felt by commercial companies and they were forced to muffle their advertising volume. There were more sales specials and less promotion for pricier brand names.
Last year was a difficult one for the media industry, including parts of the industry thought to be immune. Channel 2 franchisee Keshet was forced to lay off employees, cut wages and take a NIS 50 million bailout from its owners. The other franchisee, Reshet, also required an infusion of tens of millions of shekels and instituted pay cuts. Channel 10 was saved from having to close down right at the end of 2012.
The print media struggled as well. Maariv, on the verge of collapse, was rescued by Shlomo Ben Zvi. Meanwhile, large-scale layoffs were experienced by the Yedioth Ahronoth, Haaretz and Globes groups as well as others.
The Internet also fared poorly in 2012, with popular websites forced to slash payroll costs. The assumption that the Internet would siphon off advertising budgets from other media proved false.
In this year's survey, 21% of the marketing executives said they plan to reduce the percentage of their advertising budgets devoted to newspapers, compared to 7% who said they intend to raise it. But these numbers are approximately the same as in surveys from previous years, while the slice of newspapers in the overall advertising pie decreased only slightly, to 29%, in 2012.The outlook, however, looks much worse for commercial television. Nearly 24% of the respondents said they'll reduce their share of televised advertising, compared with 16% to 18% in previous years.
The survey also indicates changes in how budgets are allocated for the Internet. While 50% of these budgets in 2010 went toward banners on content websites, in 2011 it was down to 40% and by 2012 it had shrunk to just 31%.
The big winners, at the expense of Israeli content sites, are the international giants like Google, Facebook and Youtube. Between 2010 and 2012, the share of Internet advertising budgets aimed at social networks surged from 28% to 38%. Another thriving channel is paid links on search engines. According to the survey, 32% of Internet advertising budgets was devoted to these links, compared with 21% in 2010.
