How marketers are adjusting their budgets in response to the economy—including reducing agency expenses

Brands are contending with rising costs brought on by President Donald Trump’s tariffs, which sit at 145% on Chinese imports and 10% on imports from other countries until a 90-day pause ends in July. Simultaneously, experts are predicting an economic downturn marked by reduced consumer spending. As brands look for ways to eat costs, they’re tasking their marketing teams with finding cost-cutting measures. Researchers have anticipated that tariffs will reduce overall ad spend this year. This month, eMarketer reported that tariffs may reduce U.S. social media ad spend by up to $10 billion in 2025. Consultancy Madison and Wall in March lowered its 2025 ad revenue growth forecast to 3.6%, excluding political advertising spend, down from its 4.5% growth prediction made in December. An Interactive Advertising Bureau survey of 100 U.S. advertisers in February found that 60% of respondents expect budget cuts of up to 10% due to tariffs, while nearly a quarter expect cuts of up to 20%. Some advertisers told Ad Age that while they haven’t yet trimmed their budgets, they have created contingency plans for moving funds to more efficient channels, should costs skyrocket. Below, how brands are stretching their shrinking budgets. Also read: Tracking the ad industry’s response to the economy Tariff impact on upfront deals and linear TV investments While experts expect long-term media commitments to decrease in the upcoming upfront season, media buyers haven’t sworn them off entirely, as some expect sellers to offer discounts and incentives. One marketer who spoke on the condition of anonymity said that this person’s team has created contingency plans as they, like many marketers, wait to see how the effects of tariffs manifest. Should operating costs get too high due to tariffs on China, the brand may only allocate around 20% of what it has historically spent on linear TV during upfront season, which has typically ranged between $40 and $60 million. This person also plans to negotiate for flexibility that would allow the brand to redistribute those funds into performance-based digital media channels. The brand has not yet identified which channels it would prioritize. If that potentiality comes to fruition, consumers would see much less of a brand that has historically been very visible during live sports in the latter half of the year. Dave Morgan, CEO of TV ad platform Simulmedia, previously told Ad Age that “long-term commitments and spending will be shortened” due to uncertainty around the economy as “the advertising, media and marketing industries have all become incredibly short-term focused and myopic.” Linear and streaming TV sales are expected to remain stable at around $46 billion this year, as a 14% growth in ad-supported streaming helps offset a 7% decline in linear ad sales, according to a March update to Magna’s U.S. Ad Forecast report for 2025. Some marketers, such as Erick Dickens, a fractional CMO for brands such as LA Golf and GenCanna, said that they plan to avoid committed upfront deals altogether as brand building takes a backseat to short-term performance media. Sponsorships at sporting events are also on the chopping block as they’ve gotten more expensive, Dickens said. Instead, he foresees spending more on digital channels such as Google Performance Max, an AI-powered campaign distributor that places ads across Google properties. The marketer who spoke on anonymity has also considered altering campaign messaging to focus on retaining existing customers instead of acquiring new ones, which is considered a more expensive process. Marketing around loyalty and rewards programs, despite their costs, will be key for keeping customer churn low, this person said. Also read: Breaking down TV upfront budgets CMOs looking to spend less on agency partners Brands have gradually been spending less on agency partnerships as they allocate an increasing percentage of their marketing budgets towards paid media, rather than so-called non-working media, which generally refers to production costs. The downward trajectory has been slight, but in 2024, brands allocated 22% of their marketing budgets toward agencies, the lowest percentage in several years, according to Gartner’s survey of 395 CMOs and marketing leaders released last May. “There are strong signals that a significant minority of CMOs are looking to reduce their spend with agencies,” Ewan McIntyre, VP analyst and chief of research for the Gartner Marketing Practice, said in a recent interview. “There’s still a sense that there’s more CMOs can do to simplify their agency roster and get rid of any unproductive relationships.” In particular, he expects smaller and specialist agencies to suffer as brands consolidate with holding companies. “In these sorts of situations, holding companies tend to do well and it’s the mid-tier agencies who come off more badly, because the larger agencies just have better contracts,” he said. Gartner is focusing on agency relationships this year as it prepares to release its next CMO Spend Survey, which is typically released in May, McIntyre said. Meanwhile, agencies have been attempting to position themselves as lean and effective. One agency exec, who spoke on the condition of anonymity, said that they’ve been careful not to overhire to keep costs down. Wesley ter Haar, co-founder and chief AI and revenue officer at Monks, has positioned the agency as a partner that can save brands money with AI expertise. It’s begun baking content generation into its non-working costs and lowering the price of some of its mid-to-lower funnel services, such as SEO translation. “We’re helping clients consolidate and [reducing costs of] some of the things that they historically paid for because you no longer need a bunch of people to do it,” he said. He added that while not every brand is caught up on AI adoption, tariffs may push laggards to adopt the technology. “The reality is, it’s going to be very short-term focused for most brands for the next six to 12 months,” he said. “The real worry becomes if people stop spending, then it will be a tough agency year.” Marketers are prioritizing creators with large followings Creator marketing agencies have observed clients favoring deals with creators who have at least 100,000 followers, marking a departure from the industry’s focus on micro-creators for the past few years. Advertisers attribute the change in priorities to a few factors—it’s easier to monitor a handful of large social media accounts for brand safety compliance, for one, said Crystal Malachias, global co-managing director of McCann Content Studios. It’s also become more cost-efficient to work with a handful of more popular creators as brands try to break through a saturated market. Also read: Creator and influencer marketing trends to know According to a recent survey of 200 U.S. marketers from influencer agency Linqia, 40% of respondents said they wanted to work with celebrities with more than 5 million followers, up from 30% the year prior. Sixty percent said they wanted to work with mega creators with followings between 500,000 and 5 million, compared to last year’s 48%. While smaller creators are still popular, fewer respondents wanted to work with multiple categories of creators with followings of less than 500,000 in 2024 compared to 2023. Work with micro-creators also dropped to 62% from 74% in 2023, while nano-influencer work fell to 28% from 37%. Marketers are increasingly expecting performance from their creator campaigns as the creator economy grows to hundreds of billions of dollars. As it’s grown, it has become harder to stand out among the competition, which has necessitated paid boosting to improve the visibility of creator posts on social media, Malachias said. Also read: Brands prioritize performance in Coachella partnerships Brands haven’t gotten engagement from micro-creators that would justify paid boosting, Malachias said, adding that their content is better suited for organic social marketing. But forging contracts with multitudes of micro-creators is also more resource-intensive than working with a few macro-creators, Malachias said. “If you’re going to partner with a macro or mega influencer, the key is to be strategic in who you’re working with,” said James Nord, CEO and founder of influencer marketing company Fohr. “It has to be an influencer that’s both currently culturally relevant as well as thematically consistent with your brand ... Macro influencer partnerships without strategic alignment or relevance—those that feel random to audiences—are going to be a waste of money.” Searching for that relevance requires more resources as more micro-creators enter the mix, Malachias said, adding that AI tools have not yet gotten to the point where they can automate creator vetting. Micro-creators have also raised their prices as their businesses have matured, while macro-creators have kept rates relatively fixed. As prices increase, so does the risk of overpaying for micro-creator content, Malachias said. Still, Nord cautioned marketers against abandoning micro-creators to focus entirely on “big swing” partnerships. “One strategy we recommend, especially in an uncertain economic climate, is what we call ‘influence mapping,’ or identifying ecosystems of creators that are connected or who have overlapping audiences in a specific niche or subculture,” he said. “Instead of working with the same number of creators that are spread out, which may achieve a wider reach, with this strategy, you’re reaching hyper-targeted consumers multiple times in a concentrated period of time, which is more likely to increase conversions.”

How marketers are adjusting their budgets in response to the economy—including reducing agency expenses

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