IPA Bellwether: Ad spend dips, but what does that really mean?

The core of the research is a questionnaire sent to 300 top UK marketing directors. Almost a quarter of them (24.2%) reported having reduced marketing budgets, compared with 19.4% who increased them – a 4.8% net balance in the negative.

The Bellwether also tracks sentiment: more bad news. 31% of respondents felt less optimistic about their company’s financial outlook in Q1 compared with the previous quarter; only 18.1% had a positive outlook. That -12.9% net balance is the lowest it has been in over three years.

• Read all of The Drum’s extensive reporting on tariffgate

At the industry level, confidence hit a 10-quarter low: 45% were less optimistic about the financial outlook for the ad industry than in Q4 2024. Only 7.6% forecasted stronger growth (although, for the 2025/26 period, the balance of marketers do expect an overall increase in their marketing budgets, at 36% versus 18% forseeing a decrease).

A downward revision of outlook across the industry

Field research for the report was conducted before Donald Trump’s ‘liberation day’ and the weeks of tariff-related tumult that have ensued, but it seems that the threat of that turmoil was enough to tighten wallet-grips on the other side of the Atlantic.

To see the actual impact of those tariffs (and their knock-on uncertainties) on the IPA’s panel, we’ll have to wait another three months. But other recent signals clearly indicate a likely continued contraction in ad spend.

In recent weeks, both marketing advisors Warc and IPG Mediabrands’ intelligence unit Magna have downgraded their going-into-2025 ad forecasts in response to global volatility. Both still see ad spend growing for the year, but at a slowed rate. Warc reduced its global growth forecast by almost a percentage point to 6.7% – when combined with reduced predictions for 2026, that’s a cash reduction of $19.8bn. Magna’s predictions for US growth (with ‘cyclical’ spending, including for sporting events and elections, excluded) were trimmed from 7.3% to 6.7%.

As Warc’s director of data, intelligence and forecasting, James McDonald, told The Drum: “We’re having a wobble. The market’s having a moment and I think we’re at a bit of a crossroads. What I’m basing forecasts on is that either there will be a period of turbulence in the short term and then people will know where we stand and return to the market. Or we’ll keep having to react to the kind of nonsense that we’ve seen recently. That could spray the market completely off course, with no one willing to spend until there’s some stability. I think the former is more likely.”

“We’re in a precarious position, but I do think there’s enough resilience in the industry. Individual media may struggle before that relief, and things could turn south quickly. I don’t think they will – but the rate of change and the erratic nature of what we’re seeing is quite remarkable, so the risk of that is higher than it’s been since Covid.”

What’s causing spend to contract?

Even after factoring in the unknown unknowns of a coming Trump presidency, many analysts were buoyant at the close of 2024. GroupM saluted a 9.5% growth year, with global ad revenues topping $1tn for the first time, which it said at the time “defied expectations of a slowdown.” Magna reported total US ad sales of $380bn, a 12.4% total increase over the previous year and the second-highest total in a quarter-century. In the UK, an end-of-year report from Warc projected total spend of $40bn, for impressive 11.2% growth.

Most of the researchers behind these studies were already predicting a slight slowing of growth in 2025, with those “expectations of slowdown” predicted to finally come home to roost – in December of last year, GroupM was forecasting a 7.7% global growth rate for 2025, compared with that impressive 9.5% for 2024.

It’s worth stating the obvious: a good deal of the additional contraction now predicted by experts is down to Trump’s trade chaos: “Our base case was not a global trade war,” says Kate Scott-Dawkins, president of global business intelligence at GroupM, which won’t release official figures to update its December forecast until July. “A lot of people assumed a more business-first approach from the US administration. That is not what we’re getting”.

A good deal of marketing budgets’ fortunes, in other words, are tied to the fortunes of the global economy – and chaos in global trade portends badly for both. Last month, international organization the OECD downgraded its prediction of global economic growth in 2025 from 3.3% to 3.1%, citing knocks to consumer sentiment, continued “inflationary pressures” in many economies, and “further fragmentation to the global economy.” When the OECD makes such a declaration, economists looking at the ad industry will downgrade their predictions accordingly.

Those economic factors cited by the OECD do indeed look gloomy. Just this week, the University of Michigan’s Consumer Confidence Index, one of the oldest of its kind, fell to its second-lowest level in its 72-year history. Fears of outright recession or ‘stagflation’ – the combination of economic stagnation and inflation, which leads people to prioritize household spending on cost-inflated essentials without an increased pay packet – have grown throughout the world.

But, looking at the wider macro picture, Magna’s executive vice-president for global market intelligence, Vincent Letang, told The Drum: “We have to be careful not to overreact. My feeling is that, on this trade affair, there was a little bit of overreaction from stock markets and even from consumers… It was very volatile for a few weeks, but our job is to look at the fundamentals of the economy and of the ad market. So we’ve revised downward – but only slightly for now”.

It’s not just the economy, stupid

Predicting ad spend is not as simple as taking the figures from last quarter and adjusting them according to wider economic forecasts. It’s of course true that “investment in advertising requires confidence”, says Letang – and that marketers will often reallocate spend when confidence drops or the economy contracts. But it’s no longer true, he says, that marketing budgets are an automatic easy cut when times are tight for brands. “Marketers have acquired wisdom in the last five years,” says Letang. “They will not slash [budgets] as much as they did during Covid. There would be no reason to.”

That approach may once have been widespread, Letang says – but it’s on its way out. “It was possibly true 15 years ago. And it’s true historically – we see advertising spend being more volatile than the general economy for that very reason. But post-Covid, some brands realize that they cut too much and too quickly. They suffered in their market shares because of that. So more CEOs, CMOs and even CFOs are not going into panic mode when economic signals slow down”.

With that growing wisdom, Letang says, comes a growing understanding of the ways in which marketing budgets’ fates aren’t entirely tied to those of the wider economy: marketers trying to read the tea leaves of spend will ignore ‘organic factors’ at their peril.

One such organic factor, Letang says, carries more positive news for marketers: the slow coming to maturity of effectiveness metrics and standards, helping to remove the unpredictability from marketing investments (even if marketers can’t help the unpredictability of politics). “Look at all the improvements in adtech and media technology that are making advertising campaigns more effective, more efficient for brands, and encouraging marketers to simply put more money into advertising formats. Retail media, ad-supported streaming, AI that makes creative more affordable… it explains why over the last 10 years ad spend has been growing faster than the economy.

“Those organic factors are mitigating the impact of an economic downturn when it comes to traditional media, and keeping digital media growing even when there are difficult times.”

A very different story across different marketing categories

Most forecasts do indeed see ad spend growing faster than the global economy this year – but that doesn’t mean that all platforms, formats and players will see growth. Ad spend is no monolith; as spend contracts, it will also be reallocated with marketers and media strategists looking for bang-for-buck. As Warc’s McDonald puts it: “Sometimes I worry that when we talk about total market growth, it can be a bit tone-deaf to areas of the market that are struggling and that’ll vary by media and sector too. Different product categories stand to be more vulnerable to trade and changes in tariffs – automotive and consumer tech are more exposed than travel, for example”.

As for marketing categories, analysts have identified a likely continued shift towards digital channels, and a continued trouble spot for traditional media. Here, their findings are summed up by category.

• Digital media: Magna’s spring update maintained a very strong prediction for search, social media, digital video and digital audio: a 9.6% growth rate, hitting $293bn. Ad-supported streaming is expected to continue its powerful upward trajectory (having hit 75% of all streamed hours last year). Warc’s McDonald also says to expect some budget reallocation towards performance media.

• Traditional and premium media: Digital media’s gains, it seems, are at least partially traditional media’s losses. Magna expects a 1% drop in ad sales from “traditional media owners,” including in TV, audio, publishing and cinema.

• Direct marketing: The Bellwether lists direct marketing as a surprise “standout performer,” with brands shifting spend to the channel

• Sales promotions: A bulwark against the trend of budget reductions, according to the Bellwether, sales promotions are seemingly emerging as a good candidate for shifting spend closer to the point of purchase. Events are also called out by the IPA as a growth area.

• Retail media: Reports of retail media’s inexorable rise have not been exaggerated, according to forecasters. Warc expects it to become the fastest-growing medium in advertising this year, despite CPG brands expecting to face trade-related difficulties.

But description is not prescription; GroupM’s Scott-Dawkins cautions against seeing the above as a blow against traditional media. “What we see is a hastening of some of the trends we’ve been seeing recently: a decline of more traditional channels and a shift into digital. [But] when you’re trying to convince consumers that it’s worth spending money on tariff-impacted goods, TV may actually be a great place to spend your money, in terms of getting brand presence and salience. And as companies have become more digital, maybe they’re not spending on real estate, the cost of media has become the storefront. So there will be some media spending that will not go away, because that’s become the cost of doing business. That will be resilient, even in the face of tariffs.”

Speaking of media’s continued digitization, Scott-Dawkins argues that there’s only so much we can know about the modern advertising media landscape if we only look at the spend of the major advertisers who are members of organizations like the IPA.

According to GroupM data, digital channels (and digital extensions of traditional channels) already made up 81.7% of total ad revenue last year, and those digital channels are still dominated by a few players. The world’s five most powerful advertisers (Google, Meta, TikTok owner ByteDance, Amazon and Chinese e-commerce giant Alibaba) raked in half of all ad revenue, but only 20-30% of that revenue comes from large advertisers, Scott-Dawkins says. “The IPA and its members are certainly important… but when we’re looking at industry-level growth, you have to look at both sides of that equation; both the long-tail and the large-brand advertisers.”

And as advertising’s digitization continues apace, keeping track of advertisers outside of the traditional ad ecosystem will only grow in salience.