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Michaela Jefferson 

AA/WARC revises forecasts after strong Q1 growth

AA/WARC revises forecasts after strong Q1 growth

UK advertising spend has achieved its 19th consecutive quarter of market growth after experiencing a 5.9% increase year-on-year through Q1 2018, 1.3 percentage points ahead of forecast.

As a result, the Advertising Association/WARC Expenditure Report, published today, has updated its forecasts for 2018. The report now predicts a 4.8% growth in adspend this year, followed by a 4.5% growth in 2019.

Traditional media had a positive first quarter performance, with out-of-home up 5.3%, TV up 5% and radio - recording its strongest growth in four years - up 12.5%. Print display ad revenue for newsbrands has also increased for the first time in seven years.

Furthermore, investment in display formats across all platforms has risen 4.7%, now accounting for almost two-thirds of all UK adspend. Excluding direct mail, spend on display formats grew 6% - the strongest sector growth since Q4 2015.

However, unsurprisingly, digital advertising continues to dominate the market: search now accounts for nearly one third of UK ad spend, mobile has experienced an uplift on Q1 2017 of 26.5%, and radio's digital ad formats are up 39.3%.

As such, Q1 2018 has been the strongest first quarter for market growth in three years and, if the market grows as AA/WARC expects, 2019 will conclude a decade of continuous growth with an investment of over £24bn across the year.

According to Stephen Woodford, chief executive at the Advertising Association, the year's first quarter results reflect improved consumer confidence and the strong job market of the wider UK economy.

"UK advertising continues to show steady growth with more businesses investing more spend in advertising. This investment boosts company profits and overall GDP, creates more jobs and helps our media sector to continue to invest in the creative content and technology that the public values," he continued.

“If Government can secure a good outcome from the Brexit negotiations and introduce a business-friendly immigration policy, we should continue to see sustained UK market growth and continued export success for advertising.”

According to the forecasts for 2018, the internet's share of the adspend pot will continue to grow by 9.8%, including a further 22.5% uplift in mobile.

Meanwhile, adspend in TV and radio is to remain stable over the year, up 2.5% and 2.9%, respectively, with huge boosts from broadcaster VOD and radio's digital ad formats (see table below).

At the other end of the spectrum, advertising spend in national newsbrands and magazine brands is expected to continue in decline: -1.3% and -8.2%, respectively. However, national newsbrands are to make strong gains in digital, whilst magazine brands will have to wait until 2019 to see spend in their digital platforms grow.

Commenting on the results, James McDonald, data editor at WARC, said: “The UK’s advertising market has now grown ahead of expectations in each of the last four quarters, and our projection for 2018 growth has been upgraded by a two percentage points since the start of the year on the back of sterling results across the media landscape.

“Online ad formats – particularly search and social media – continue to over perform, but traditional media are also proving their worth to advertisers.

"Notable among these are radio, TV, out of home and national newsbrands, with the latter carrying on from a good final quarter in 2017 to reverse a seven year downturn in display revenue.”

Meanwhile, Jo Lyall, MD, Mindshare UK, said: “Interestingly, this quarter’s growth seems to have been shared around, with traditional mediums and online alike seeing impressive year-on-year uplift and suggesting that perhaps, amidst Brexit uncertainty, budget is being more cautiously distributed to cover all bases.”

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