With unprecedented turmoil, the year behind us re-shaped the world and brought some old questions and complexities to the extremes, as well as some new perspectives.
The European Association of Communications Agencies: EACA, along with its member agencies, is working on the front lines for a better future of advertising and everyone in the ecosystem – from consumers and the public, who need transparency and protection, to businesses, which need equal opportunities and space to grow. Here, looking back on 2020 and forward to 2021, EACA Director General Tamara Daltrooff spoke exclusively to CorD Magazine.
Last year was a challenging year in many ways – first and foremost due to the global COVID-19 pandemic, but also with numerous political, social and ecological challenges across the globe. We would like, however, to start on a more positive note. Google became the first digital platform to join EASA, the European Advertising Standards Alliance. What does this mean for the European advertising ecosystem?
– EACA and our member communications agencies welcome Google’s active support for advertising self-regulation by becoming a member of EASA. The advertising ecosystem is only as strong as all of its players working together. Google becoming the first digital platform to join EASA is a milestone and a key achievement to secure the future of responsible advertising and consumer protection.
A new resource designed to help young people better understand the world of online advertising was launched by UK advertising’s non-profit education programme, Media Smart, in collaboration with the European Interactive Digital Advertising Alliance (EDAA), of which EACA is a board member. What is the importance of empowering and educating young people in this domain, and what are some of the main challenges?
– MediaSmart is doing a great job in the field of media literacy, helping young people navigate with confidence through an online world of messages and communications – including commercial advertising. This is both an opportunity and the greatest challenge. Understanding what the value exchange behind advertising is – for example free content in exchange for data – is a key to transparency and the sustainability of ad-funded business models that are often used by media. MediaSmart also helps young people better understand how digital advertising works and what choices they have with regard to the ads that they see. So far, MediaSmart has only offered its programme in the UK. There could be opportunities to expand it to other markets.
Obviously, agencies are also looking into the ‘new’ way of working (remotely), travel and office space will play a different role in the future. The long-term impact on the company culture should not be underestimated
The European Commission wants to revamp the EU’s digital tax, but EACA stated that this would disproportionately hit the advertising sector, which is already suffering from the COVID-19 crisis. What would be the consequences of such a tax? And could there be some better alternatives?
– As you mention, there are agencies that are struggling with the consequences of the COVID crisis. A digital levy – actually meant to recover investments in the EU Recovery Fund – would mean yet another blow. Moreover, the EU pressing on with its own tax while OECD-level negotiations about a global tax reform are ongoing sends the wrong message and a destabilising signal to international negotiators, threatening the EU’s credibility in those talks. A better alternative is to put full support behind the OECD process and work towards a global solution.
The introduction of such a tax would see a disproportionate burden placed upon advertising agencies. Not only would agencies have to pay the digital tax directly, but it would also result in the cost of placing ads online increasing, and this increased cost will then be passed down the supply chain, ultimately being borne, most likely, by advertising agencies. This will result in agencies paying the digital tax not once, but twice.
What is the Immediate Impact of COVID-19 on the advertising industry? And what are some expected long-term consequences?
– Advertising budgets and advertising spend took an immediate hit, as brands responded to the pandemic. WARC has estimated that the global advertising spend fell by 10.2% in 2020 compared to 2019. However, following the immediate cut in spending during the first half of 2020, the ad spend increased in the second half, especially spending related to social media and online outlets. National lockdowns have led to changes in consumer behaviour. According to IAB Europe data, the digital video ad spend actually grew by 0.3%, in 2020, as a result of people spending more time at home streaming content. Overall, whilst digital advertising was affected by the pandemic, this has not been as detrimental when compared with other advertising mediums. Unfortunately, COVID-19 had quite a negative impact on the advertising labour market.
Many have been forced to implement a range of cost cutting measures in response to the pandemic, from furlough schemes, pay cuts and hiring freezes to redundancies. Forrester have estimated that 50,000 people globally will become unemployed across both 2020 and 2021 as a result of the pandemic. As a consequence, agencies have lost talent, while investment in building up new talent has been low. It will take a while for staff levels to return to those of pre-COVID-19 days.
Understanding what the value exchange behind advertising is – for example free content in exchange for data – is a key to transparency and the sustainability of ad-funded business models that are often used by media
Are there new regulations and initiatives around platforms and political advertising on the horizon? And what could be potential solutions that would benefit all stakeholders in this (advertising) ecosystem?
– In December, the European Commission published two important proposals: the Digital Services Act and the Digital Markets Act. Together they constitute a reform of Europe’s digital space and introduce new rules for all digital services, including social media, online marketplaces and other online platforms. The DSA focuses specifically on the dissemination of illegal content online. This refers to products, services and content.
The Commission expects drastic changes in how platforms moderate and/or promote content. It also requires more transparency around online advertising on platforms. Recipients of an ad should understand that what they see is an ad, who is behind the ad and what parameters were used to target them. The Digital Markets Act aims to make sure that businesses operating in Europe can compete freely and fairly. It addresses the “gatekeeper” problem, whereby “major providers of core platform services” block new entrants from entering the market and push prices up. Again, this includes search engines, social networks and video sharing platforms, but also advertising networks or ad exchanges. The DMA requires such providers to become more transparent. For example, they will be obliged to give advertisers and publishers information that helps them understand the price paid for each of the different ad services.
Political advertising is not specifically addressed in these two proposals. However, the Commission should come up with a dedicated proposal in Q3 this year. This should provide further transparency surrounding online political adverts, including why an individual is seeing a certain political ad, who paid for it, how much was paid, and what micro-targeting criteria were used. As well as this, the Commission is planning to further develop its work on the Code of Practice on Disinformation, with guidance expected this Spring on how platforms can update measures to stop the spread of disinformation online.
The aforementioned proposals will now be discussed at the level of the European Parliament. As we have seen in discussions preceding the launch of the two initiatives, some Members of the European Parliament are highly critical towards advertising. They see a solution in only allowing for contextual advertising, for example. The Commission has a softer stance on advertising, understanding its necessity, for example, to finance independent media. Therefore some of the elements in the proposal can be quite positive for the ad ecosystem and those seeing the ad, including the noted transparency rules.
How does 2021 look for the advertising industry – and what would be some main trends to look out for?
– Experts have predicted that 2021 will be a year of recovery for the industry, but this is anticipated to be a slow and long recovery.
As I mentioned previously, digital advertising was not hit as hard as other advertising mediums, and digital is predicted to continue to strengthen its position within the industry, with programmatic advertising and video advertising expected to be a strong trend in 2021. We also observe that 2021 will be a ‘double’-pitching year, as many pitches were postponed until 2021. This situation is very challenging for agencies, as their workforce has been reduced. Obviously, agencies are also looking into the ‘new’ way of working (remotely), travel and office space will play a different role in the future. The long-term impact on the company culture should not be underestimated. With the first anniversary of George Floyd’s death around the corner, agencies will be challenged to show progress in diversity & inclusion.
With regard to policy, the DSA and DMA will keep us busy for the next few years. The Privacy regulation is also still on the agenda and in mid 2021 it will be decided whether we will see a new attempt at a European digital level. Then there are other developments, for example a major overhaul of regulation in the food sector. For agencies, this means renewed discussions about nutri-score, labelling, packaging etc., but also about health. Regarding the latter, we are waiting for the Commission to launch its “Europe beating Cancer” plan, which will obviously link to issues like advertising for food, alcohol or tobacco.