Five insights on media inflation

The latest WFA Outlook report highlights a return to a rising inflationary market and that presents challenges that brands need to manage.

Every media director will have to work out the right solution for their brands, but five general trends are apparent from the aggregate data provided by our nine agency and consultant partners:

Inflation is challenging for media budgets

Just as compound interest helps your savings grow faster, so media inflation means that budgets reach fewer people year after year. If we assume that an advertiser reached 100 people in 2023, the latest numbers mean that the same plan (assuming no change to media mix, budget or consumer behaviour) will only reach 89 people in 2026, based on the global averages. Media will need to work much harder for brands.

Good news on retail media

It’s been the fastest growing channel for the last couple of years, but it could now be reaching the flatter part of the S curve. Inflation forecasts are making it easier for brands to plan into the schedule despite the fact that retail media and search are now swallowing more and more marketing spend.

As Manuel Reyes, CEO and Founder at Cortex, puts it:

“Many advertisers are seeing diminishing returns from increased investment and new vendors are popping up on every corner. While it will continue to grow, it most likely will be at a slower rate and with lower prices.”

Traditional media in decline

Media inflation in traditional media in Europe is unexpectedly high and it’s being driven by a lack of eyeballs rather than additional budget. This is ‘bad’ inflation and advertisers will want to carefully assess the value they receive from these channels as they plan for the years ahead.

Holding pattern in the US

US media inflation is now cooler than it has been for some time. The cause is unclear. It could be that the market has already hit the highs and is waiting for everyone else to catch up. It could be that budgets are being held back ahead of the US election, which has traditionally seen a lot of new money flooding the market. Some of the policies being espoused on the campaign trail have been described as 'highly inflationary', were that to translate to the real economy, the result has traditionally been a drop in media spend.

“Much of the business world is in a holding pattern awaiting the US Presidential Election. Until that outcome, and the ensuing impact on economic and foreign policy is known, many are stuck in neutral, with no overriding sentiment
informing global market”, notes Nick Waters, CEO at Ebiquity.

Everything’s very normal

With the exception of a few markets experiencing hyper-inflation, such as Argentina and Turkey, it’s tempting to argue that these numbers are simply ‘normal’. These numbers seem rather “normal”, with little indication of the instability that characterizes the world today. The price of gold — a traditional hedge in uncertain times — has soared, the transition to a greener economy has stalled and trade barriers are rising in multiple markets. Each of these factors might be expected to restrain media budgets (which traditionally are a “canary in the coal mine” for the global economy), and hence media pricing. Instead, we are seeing inflation.

“Looking ahead to 2025 our bearish view on demand growth in linear TV continues, currently dropping to low single digits. This has a relatively minor effect on projected TV prices for 2025 however, as continued audience declines from linear into streaming services support moderate inflation. That said we do see higher inflation in Digital and OOH this coming year”, notes Tim Howett, SVP Global Investment at OMG.

How each of these trends impacts on your brand and your business will be individual. The right response will vary by category, positioning and market. What will unify all media directors, however, is the sense that the job’s not getting any easier.