AA/Warc: Digital sends UK advertising to its highest growth in four years

2014 saw UK advertising grow at its highest rate since 2010, increasing 5.8% to £18.6bn, according to the latest Advertising Association/Warc expenditure report, published today.

The quarterly forecast also shows that the strong growth is set to continue, with adspend predicted to break the £20bn barrier in 2016.

Internet advertising (+15.0%) and mobile (+58.9%) continue to grow strongly but digital advertising through traditional channels also took-off in 2014. Broadcast video-on-demand (+15.1%), digital national (+16.4%) and regional (+24.7%) newsbrands were stand-out performers but the upward trend is also reflected in magazines and outdoor.

“It’s time to stop thinking of digital as something that lives on the internet,” said Tim Lefroy, chief executive at the Advertising Association.

“In cinemas, outdoor, news, television and elsewhere, advertising is seizing the opportunity of new technology. That trend is transforming our media, driving growth and keeping UK advertising ahead of the global competition.”

Ian Twinn, director of public affairs for ISBA, has welcomed the report, saying that the new figures for adspend are “great news” for business and consumers.

“This is at its highest rate since 2010, highlighting advertising as an economic powerhouse for the exchequer,” said Twinn.

“The strengthening economy is reflected in growing spend on advertising across all media from traditional TV spots, regional news brands to digital and the fast growing mobile advertising which break the £20bn barrier by 2020.

“When business spends money on advertising it means consumers are buying and job opportunities are growing.”

Key insights

– TV spot advertising, benefiting from the football World Cup, increased 5.4% year on year to reach £4,463m in 2014. The growth rate will slow to 4.4% this year, however this is up on the January forecast by 0.3 percentage points (pp). With adspend penned to rise a further 4.6% in 2016, TV spot is set for its strongest consecutive growth in over a decade.

– Radio adspend (excluding branded content) recorded annual growth of 10.9% in 2014, its best performance since 2000. After an exceptional second quarter of growth (17.7%), adspend maintained double-digit growth in the second half of last year (10.3%). AA/Warc expect radio to register an annual rise of 4.9% (a +0.9pp revision from January) in 2015, slowing to 3.9% next year.

– Out of home adspend rose 3.0% in 2014 to surpass the £1bn mark for the first time. Within the total, adspend on digital OOH rose strongly at 27.3% last year and now comprises around a quarter of the total. The forecast has now upwardly revised 2015 growth to 4.1% (+0.8pp), with further growth of 4.5% expected in 2016.

– National newsbrands recorded total adspend of £1,370m in 2014, a year-on-year drop of 4.7%. The rapid rise of digital ad revenues (+16.4% to £214m) could not offset the decline in print (down 7.7% to £1,156m). However, AA/Warc expect the overall decrease in spend to slow in 2015 (-1.8%) and flatten in 2016 (-0.2%), driven by an average growth rate of 14.5% in digital adspend over the forecast period.

– Regional newsbrands witnessed a drop in total adspend of 3.6% last year to £1,253m, however this was half the rate of decline recorded in 2013 (-7.3%). Print revenues fell by 7.0% to £1,079m, although digital revenues rose by a solid 24.7% to reach £174m. AA/Warc expect total ad revenue to continue to decline at a similar rate this year (-3.7%), slowing to a 2.4% fall in 2016.

– Magazine brands adspend fell 4.3% in 2014 to £993m, the first time the total has been below the £1bn mark since 1986. Within this, print dropped by 7.6% to £727m while digital revenues rose by 5.9% to £266m. Growth in digital adspend is predicted to cushion the decline in print over the forecast period, however, with the fall in total ad revenue slowing to 3.3% this year and only 0.7% in 2016.

– Cinema adspend, according to data from Nielsen, registered a year-on-year rise of 9.4% in 2014, reaching a value of £202m (its second-highest total). Looking ahead, AA/Warc anticipate overall adspend growth of 4.8% this year – to £212m – followed by 2.2% growth next year, when spend should top its 2012 peak.

– Internet (including mobile) adspend – using the IAB definition, incorporating revenues from newsbrands, magazine brands, broadcaster VOD and radio stations – rose by an estimated 15.0% in 2014. Mobile was a strong driver of this growth and now accounts for just over 22% of spend on £1,623m (up from a 10% share in 2012).

– Direct mail advertising revenue reached £1,835m in 2014, a year on year decline of 1.1%, according to data from the Royal Mail. AA/Warc expect direct mail adspend to dip in the region of half a percent in both 2015 and 2016.