How ad agencies can cope with reduced spending from tech clients

Tech clients are slashing their marketing budgets following the massive layoffs across the globe earlier this year. This is also reflected in the latest financial results of global advertising holding firms. 

According to the recent quarterly results from WPP, Q3 like-for-like revenue less pass-through costs decreased by 0.6% with growth in the UK, Western Continental Europe and the rest of of world, offset by declines in North America, with continued weakness from technology clients and in China.  

Mark Read, chief executive officer of WPP, said: “Our top-line performance in Q3 was below our expectations and continued to be impacted by the cautious spending trends we saw in Q2, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half.” 

Meanwhile, Philippe Krakowsky, CEO of Interpublic Group, also said during the third quarter of 2023, IPG’s revenue performance did not measure up to expectations, “factors that we have identified since the early part of the year continued to weigh on our growth in the quarter. These include the decreases in client activity in the tech and telecom client sectors that have been evident across our industry, and the performance of certain of our digital specialists.” 

“Another factor impacting results is increased concern among marketers related to macroeconomic conditions, which led to the delay of projects and sales cycles, as well as slower-than-anticipated onboarding of some new business,” he added.  

Potential reasons behind 

While the rise of AI and other new digital technologies may have played a role in the reduced budgets from tech clients, Industry players MARKETING-INTERACTIVE spoke to attributed this phenomenon to the increasingly difficult economic and political climates.  

Keso Kendall, SVP, APAC at TEAM LEWIS, said economic and political climates make companies more cautious, as well as increased difficulty grasping customer attention in an increasingly complex marketing mix.  

Despite TEAM LEWIS not seeing a decrease in spending among its technology clients, Kendall said it has certainly seen them come under increased pressure to demonstrate ROI and justify marketing spend. 

“Many are turning to their agencies to help them address this – they know the importance of continuing spending and campaigns but often struggle to showcase this internally,” she added. 

In fact, the current economic slowdown has had regional knock-on effects, impacting investment and consumer spending.  

In such circumstances, companies generally often re-evaluate their marketing strategies to optimise their resources, especially after the meteoric expansion of tech companies during the Covid period, quickly proceeded with the impending strategic decisions around layoffs as things returned back to somewhat of an equilibrium, said Lars Maehler, client lead of Publicis Media Hong Kong and head of Digitas Hong Kong.  

“While there is caution in reference to this climate, less spending on both consumer and client side can be further attributed to inflationary pressures,” he added. 

How can agencies attract more ad spending from tech clients in 2024?  

In light of these changes, agencies will need to be more innovative and flexible to attract ad spend from tech clients. One possible strategy is to embrace the potential of genAI and use it to offer more targeted and effective ad campaigns, said David Ko, managing director, RFI Asia. 

This is further backed by the results of Forrester's Report Predictions 2024, which showed that GenAI’s transformative impact will benefit 30% of firms in APAC in 2024. Most APAC firms see genAI as a way to improve productivity but stumble due to a risk-averse culture and inadequate data management capabilities, said the survey. 

Despite the fact that ad spending may have been reduced, the expectations of measurement and analytics are higher than ever before, as decisions around marketing spend need to yield effective returns on investments.  

Publicis’ Maehler said this requires stronger oversight on where the agencies’ spending is going, agile optimisation initiatives and collaborative decision-making between clients and their respective agency partners.  

“Meshing together the know-how of the digital marketing eco-system with internal business and operational priorities is key to effective outcomes,” he added.  

Strengthening creative offerings is also key as tech clients are often at the forefront of innovation. He said that agencies need to showcase their ability to think creatively and develop innovative marketing campaigns.  

On the other hand, TEAM LEWIS’ Kendall said agencies need to really understand the context of the market in which their clients operate and then apply strategic creativity to create standout campaigns that cut through to audiences.  

“Finally you need to be able to measure and report on all of these so clients know what is working and where they need to further optimise,” she added. 

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