Online sales bolster ad industry

Budgets for ‘below-the-line’ marketing activities such as events, PR, market research and sales promotion experienced their steepest cuts in two years in the first three months of 2008, according to the quarterly Bellwether report from the Institute of Practitioners in Advertising (IPA). Direct marketing budgets also saw the largest fall in eight years, as the wider advertising industry experienced budget cuts for the second consecutive quarter.

The internet was, as has been the trend recently, the only category to see an upward revision in marketing budgets in the first quarter. The survey shows that, after recent sluggish growth, 27 per cent of respondents reported that online advertising budgets were up. The significant growth of internet spending meant, however, that ‘main media’ budgets were unchanged in the first quarter, and are therefore ‘set to see the fastest growth in 2008’.

The report highlights two effects on marketing spend in early 2008 that look set to continue. The first is the fall in business confidence following weaker sales, subdued consumer spending and fears over future prospects. The second is the continued ‘migration’ of marketing spend towards the web.

Moray MacLennan, chairman of M&C Saatchi Europe, says he was expecting as much. He reflects that we ‘should not be surprised, perhaps, that budgets are being revised downwards in the current climate.

It is, however, a good moment to remind advertisers that those that maintain the strongest marketing spend will come out on top.’