UK claims largest online ad market in Europe
Pictured: Karen Fraser, director, Credos
A record number of SME advertisers and a strong online retail market are together driving growth in UK online advertising, according to the latest Advertising Pays report.
Launched at IAB Engage today, the study - conducted by UK advertising thinktank Credos in partnership with Enders Analysis - found that 57% of the UK's total ad spend in 2018 was online. That figure is expected to rise to 62% by 2020.
The UK therefore ranks as the third-largest online advertising market globally and largest in Europe. Relative to the size of the economy, UK online ad expenditure is also now the highest in the world at 0.63% of GDP.
"As we passed the point where online advertising accounted for more than 50% of total advertising expenditure, we decided it was time to review the impact of digitalisation on our industry," said Karen Fraser, director at Credos.
The link between the rate of online retail growth in the UK and growth in online advertising is "particularly interesting", she said, with retail e-commerce expenditure per capita higher in the UK than in any other G20 market.
According to the report, the online retail market has also helped to drive strong growth in the UK ad tech sector, which has attracted more than £1 billion in investment since 2013.
"The ability to personalise advertising messages to consumers will become increasingly sophisticated – it is in our industry’s hands as to how we use this technology respectfully and in ways that the public value," Fraser added.
Meanwhile, the lower costs of online advertising and new targeting technology have allowed for more SMEs to advertise than ever before, rising from 30% in 2013 to 41% in 2017.
According to Claire Enders, founder of Enders Analysis, there are 800,000 more small businesses in the UK today than 15 years ago.
“The entrepreneurial energy of the 'nation of shopkeepers' is evident across the UK online economy, directly feeding into the most vibrant online advertising ecosystem in the world," Enders said.
"Online advertising, which has provided accessible, flexible and powerful tools for new advertisers, deserves no small credit for this success."
While the sector will not be immune to the "economic headwinds" facing the UK, the "underlying adaptability" of UK businesses and the advertising industry will see online advertising continue to grow, she added.
Elsewhere, Stephen Woodford, chief executive, Advertising Association, commented: “Looking ahead, the challenge for our industry working with the Government is to find the right balance of statutory and industry regulation to encourage growth, ensure fair and healthy competition, minimise societal harm and accelerate positive societal change.
"With the right conditions, UK advertising can play a fundamental role in the UK’s future growth, not just within our borders but in how we do business with people worldwide."