AA/Warc: Record adspend results tell mixed story
Despite most traditional media being stagnant or in decline, the UK’s ad market expanded at its strongest rate since 2015 last year.
According to the latest data from the Ad Association and Warc, UK adspend rose 6.3% year-on-year to reach £23.6bn in 2018, marking the ninth consecutive year of market growth and highest annual total since monitoring began in 1982.
The growth is largely driven by rising investment in paid search and online display formats, particularly social media and online video.
“These online components account for just over half of UK advertising spend today, and both are almost entirely data-driven, enabling advertisers to pair their messaging with internet users based on their digital footprint," said James McDonald, managing editor at WARC.
"These tools are also accessible, enabling a long-tail of SMEs to invest, and this has transformed the DNA of advertising in recent years."
The final quarter of 2018 recorded expenditure growth of 5.7% over Q4 2017, with adspend reaching £6.5bn. This includes adspend during the Christmas trading period and marked the 22nd consecutive quarter of market growth.
Overall, adspend is forecast to grow 4.8% this year, with a further rise of 5.5%, projected for 2020. This would push investment to over £26bn, completing more than a decade of continuous expansion for the UK advertising industry.
Within the forecast, traditional linear TV is forecast to grow 3.4% by next year, however television VoD is forecast to grow 20.2%.
Similarly, radio is forecast to grow by 5.7% over the same time, while investment in online radio formats are set to rise by 21%, the highest forecast growth recorded in the report.
This is in contrast to direct mail, which is forecast to decline by -7.3% by 2020 and printed media, which remains in decline. However, online news and magazine brands have still been forecast growth - 7.2% and 1.2%, respectively.
Commenting on the results, Stephen Woodford, chief executive, AA, said the figures demonstrate "the strength and resilience" of the UK advertising industry during a time of political and economic uncertainty in the UK.
"They are a testament to the world-class capabilities of the third of a million people working in advertising and marketing services across the UK," Woodford said. "With every pound spent on advertising generating six pounds of GDP, a strong advertising industry is a key pillar of a strong economy.
“With further growth predicted for both 2019 and 2020, UK advertising looks set to deliver over a decade of continuous growth. Like all UK industries, we hope to see a positive resolution of the Brexit situation, with business-friendly data, immigration and trade outcomes that could further boost this forecast growth”.
Overall market growth is being driven by increasing spend on search (up 14.3%) and online display advertising (up 21.4%), with further, but milder, growth predicted for 2019 and 2020.
The positive story for online ad formats was reflected across a number of media. Notably high growth was recorded for online radio ad formats, with a year-on-year rise in 2018 of 30.6%.
Ad investment in broadcaster video-on-demand rose 29.4% to reach £391m, while regional online newsbrands recorded growth of 7.6%.
“Yet another consecutive quarter of growth and a record level of investment really highlights the importance businesses are placing on advertising," said Josh Krichefski, CEO at media agency MediaCom UK.
"Even in the face of uncertainty, brands are increasingly turning to advertising for long term and short term growth."