As the global recession threatens to take hold, many businesses are preparing for a downturn in their profits. One industry that is surprisingly resilient in times of recession, however, is advertising.
Despite predictions of a recession, experts believe that ad spending will actually increase. So why is advertising so resistant to recession? Read on to find out!
The Inflation Problem
One of the most significant contributors to the anxiety surrounding a potential recession is the fact that inflation in the US is at a 40-year high.
Prices for everything from housing and healthcare to food and fuel have all been increasing, and many families are struggling to keep up.
This has marketing professionals feeling anxious about the possibility of a recession. After all, when families are struggling to pay their bills, they’re unlikely to have much money left over for discretionary purchases.
However, digital marketing professionals shouldn’t have too much concern. Advertising is a resilient industry, especially channels that are digital.
The Argument for Optimism
Even in the face of a potential recession, there are many reasons for digital marketing professionals to be confident over the next few years. Here are some of the core reasons that digital marketing and advertising professionals should be poised for improved revenue, not a damaging slowdown.
Wages Remain Steady
Though the threat of a recession looms, one factor that paints a picture of optimism and hope is the income of US individuals and families. Despite rising costs, wages remain steady. In fact, they have risen at record pace.
With wages remaining steady, so has consumer spending. Though the cost of goods is rising, consumers are mostly keeping pace and continuing to spend and receive wage increases at an equal rate. A powerful job market is not a characteristic of recent recessions, which makes upcoming economic turbulence not nearly as intimidating.
This Recession is Different
When economists talk of recession, many can’t help but look back at the 2008 recession, which was caused primarily by the housing market crash. This recession was difficult for many industries, including advertising. Ad spending dropped by over 5% in 2009.
However, the current concerns around a potential recession are very different from those in 2008. The current concerns are largely centered around inflation, rather than a housing market crash.
In fact, many experts believe that the current conditions are actually quite different from those in 2008 and that ad spending will not be nearly as affected this time around.
So what does this mean for digital marketing professionals? It means that there is still reason to be optimistic about the future of ad spending, even as the US faces economic challenges in the current inflationary environment.
Digital Channels Are Strong
Historically speaking, digital channels are much more resilient to recession than other, more traditional channels such as print. In fact, in the last recession, digital channels actually flourished while traditional channels such as print took a hit.
This is because digital channels are more efficient and offer a higher ROI than traditional channels. In times of economic difficulty, businesses are looking to get the most bang for their buck, and digital channels offer just that.
What’s more, digital channels offer businesses the ability to target their ads more precisely than traditional channels. This is important because, in a recession, businesses need to be extra careful with their ad spending. They can’t afford to waste money on ads that don’t reach their target audience.
Finally, it’s worth noting that during the last recession, many companies actually increased their ad spend on digital channels. This is because they recognized that though times were tough, it was still important to maintain and even grow their customer base.
Innovation in Ad Delivery
Another reason for optimism in the advertising industry is the constant and persistent innovation in the serving of ads by major platforms. Google, for example, is always coming up with new ways to deliver ads more effectively. Just last year, they announced a major change to their ad delivery system that would show ads more evenly throughout the day instead of clustering them around peak traffic times.
These changes, along with other innovations in ad delivery, means that businesses are able to get their message in front of consumers more effectively than ever before. Businesses like to see innovation and are more willing to spend money on advertising when they have more insights and assurances that it’s going to have the intended impact.
Impressions Continue to Rise
At the core of the value proposition for advertising is the popularity of social and online platforms. As long as interest continues to rise in these platforms, so should invest in marketing on them.
Luckily, there are no signs that usage of these platforms is slowing down anytime soon. In fact, just the opposite is true. Social media usage continues to grow at a rapid pace. The number of social media users has exceeded over 4.5 billion and continues to grow rapidly.
What’s more, time spent on social media is also growing. The average person now spends nearly two hours per day on social media, up from just over one hour in 2012.
This trend is also being driven by the rise of mobile usage. More and more people are accessing social media and other online platforms on their smartphones. Over 60% of social media time is now spent on mobile devices.
As social media usage and time spent online continue to grow, so too should the number of impressions for ads. This is good news for businesses that are looking to reach their target audiences through advertising.
Final Words: What Does This Mean for Marketing Professionals?
The recession has had a clear impact on consumer behavior, but it is important to remember that this is not the first time businesses have had to grapple with difficult economic times.
Inflation and other factors are causing some concern among advertisers, but there are many reasons to be optimistic about the future of advertising.
Digital channels continue to grow in strength, impressions are up across all platforms, and innovation in ad delivery means that ads are becoming more effective than ever.
Advertisers who stay ahead of the curve will be best positioned to take advantage of these trends and increase their ROI in spite of any recessionary headwinds.