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Recession Fears Cue Up as Ad Execs Return to Cannes Party

After a sharp pullback in ad spending at the start of the pandemic, brands ramped up their efforts to reach consumers as economies reopened, but some firms are slashing budgets again

iHeartMedia + MediaLink Annual Cannes Lions Party.
By Ivan Levingston
June 26, 2022 | 10:21 am

Bloomberg — Take it from Joao Paulo, who manages the infamous Gutter Bar where many an evening ends at the advertising industry’s annual confab on the French Riviera: Cannes is back.

“It’s much more busy than two years ago,” Paulo said, with 2,000 or so people stopping by each night and some staying until 6 a.m. “They’re more excited than usual.”

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The flowing rose at the bar matched the broader -- at least outward -- tone of the Cannes Lions Festival. After a two-year hiatus, executives were happy to mingle on the sunny La Croisette boulevard and beaches this week. However, an undercurrent of anxiety over the economic outlook edged into conversation.

After a sharp pullback in ad spending at the start of the pandemic, brands ramped up their efforts to reach consumers as economies reopened. Now though, worsening inflation and fears of an imminent recession are leading some companies to cut back their budgets again.

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“We’re not naive about what would happen if the economy does move into a recession,” WPP Plc Chief Executive Officer Mark Read said in a cabana-side interview at his firm’s beach setup. “We’re operating against a backdrop of what I would describe as -- we haven’t seen anything yet, but -- headwinds in the economy over the next year.”

GroupM, the ad-buying arm of WPP, cut its estimate for advertising growth in 2022 in a mid-year update. However, the report noted that many sectors are still seeing significant growth.

“The likelihood is it’s going to be a tough ‘22,” said Martin Sorrell, founder of digital marketing services business S4 Capital Plc.

But the more cautious forecast wasn’t emphasized at panels and over-the-top beach displays.

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Meta Platforms Inc. had special rooms for visitors to record reels for Instagram and a demonstration space to try virtual reality technology. Spotify Technology SA brought in top musical talent like rapper Post Malone and pop artist Dua Lipa.

“It’s unbelievably exciting to be back in Cannes, and I think there’s a real feeling of gratitude for the industry to be able to get together,” said Nicola Mendelsohn, vice president of Meta’s Global Business Group. There’s also “a real desire, more than I’ve seen in in a long time, about learning.”

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Reddit Inc. sought to showcase a friendlier side with an “explorers club” themed house that served rose and pastries on its observation deck. TikTok had a relatively subdued presence despite its outsized influence, renting out a cabana sandwiched between T-Mobile and Roku.

TikTok at the 2022 edition of the Cannes Lions International Festival of Creativity. Photographer: Olivier Anrigo/Getty Imagesdfd

One topic of fascination during the week was Netflix Inc.’s plans to begin selling advertising, and which companies the streaming giant might partner with to build out their offering. While Netflix co-CEO Ted Sarandos said in an on-stage interview that the firm was discussing partnerships, he warned it was still early in the process.

“This could be the last hurrah for a while,” said Richard Raddon, co-CEO of advertising technology company Zefr, in an interview on one of the yachts parked in the Bay of Cannes. “There is this weird feeling of a little bit like what’s going to happen with the world.”