AA/Warc adspend report: Industry reaction

The various shocks of the last six months – including multiple Brexit delays and further uncertainty – have not disrupted the momentum of the advertising economy, the latest AA/WARC report has shown. UK advertising spend reached record levels in Q2, but adspend over the first six months of 2019 was 5.2% higher than a year earlier. The results are a reminder of the vital role of advertising in shock-proofing businesses in uncertain times, by building strong brands and attracting new customers.

Much of the positive trajectory comes from the growth of internet advertising, but these headline numbers disguise a lot of variation. Online spend growth is driven more by the long tail of small digital-only advertisers, than by shifts in the behaviour of established brands. The growth in OOH, VOD and especially cinema, where budgets rose by nearly 50% in Q2, gives us a clear signal that major advertisers are maintaining a broad media mix.

These figures remind us that there is no one-size fits all answer for different brands. Advertisers need to be making intelligent trade-offs across a broad media mix. Brands shouldn’t just follow trends in how other brands are spending – they need to invest in understanding how media drives growth, making smart choices about where to spend, and learning what’s going to make the biggest impact.

Despite the ongoing uncertainty around Brexit, it’s encouraging once again, to see the resilience of the UK’s ad market. With growth recorded across multiple formats – namely, digital out of home, online radio and TV VOD – it’s encouraging that advertisers continue to invest, putting audiences, and the way they consume media, at the heart of their media plans. This ensures we create dynamic campaigns that appeal to people’s motivations and emotions, particularly as people are feeling more and more powerless about today’s political situation.

Although we’ve seen UK adspend reach record level for this quarter, it’s more important than ever that as marketers, we take the time to truly understand our target audiences and adjust the media plan accordingly. This will no doubt provide a competitive advantage as we look to 2020.

Together with the recent Q3 IPA Bellwether report – which forecast rising adspend in 2020 despite current budget cuts – today’s findings paint a promising picture for the UK ad industry. Six years of consecutive market growth is a hugely positive trend – especially given the uncertainty that has presided over spending since the 2016 referendum.

With online advertising the predictable growth driver, it’s encouraging to see other digital ad formats (such as DOOH) and more traditional mediums (including newsbrands) also experiencing solid rises. TV VOD and cinema, however, are stand out performers in comparison to this time last year – reflecting the increasing popularity of these formats among audiences and adding to what is set to be a more diverse advertising landscape to year-end and beyond.

With Brexit dominating the news agenda and fears it will lead to belt-tightening, it is very encouraging to see that adspend is rising – and across most channels.

The media market is excitingly diverse right now and it’s great to see spend reflect this – radio, VOD and cinema are performing so strongly and for good reason, as media owners have really developed the offering here in line with consumers’ needs combined with the high levels of attention associated.

Moreover, we’ve seen the main TV broadcasters take big strides in 2019 to improve and diversify their non-linear TV offering. This bodes well for continued growth in 2019 and into 2020 and should lead to ever more diverse and improved media strategies as advertisers and planners have a range of channels – all in rude health – to choose from.

It is no great shock that overall ad spend has continued to grow while the rate of growth of UK consumer spend has fallen. Brands are more determined than ever to stand out and gain market share but the level of average UK disposable income has remained sluggish. However, it is growth all the same and the marketplace remains competitive with an increasing amount of channels to grab consumers’ attention.

People are still consuming content in similar patterns, according to the IPA ‘Making Sense of the Commercial Media Landscape’ report, however, how they consume content has changed. These AA/WARC figures reflect a continuing shift from live and recorded TV to online video content.

Ad revenue for newsbrands probably owes its increase to the Brexit saga. People want to know where they stand, using sources they trusts, during an increasingly complex process.

The cinema spend increase is huge, given that reach has only gone up by 7% since 2015 (same IPA report as above). Undoubtedly, it is the media whereby the consumer can’t escape an advertiser’s message, providing they’re not off buying popcorn! If the creative is great too the advert can be as entertaining as the trailers. With the reach not matching the increase in spend though, there’s a chance that more spots could be added to films, which could be seen as a negative by the consumer. The number of ads needs to be carefully managed by the cinemas to ensure that the undivided attention nature isn’t abused.

The inexorable rise of search shows no signs of plateauing, as consumers seek more instant, relevant content and the medium evolves to meet demand. The growth of voice and emergence of new digital channels has also proved a catalyst to even stronger growth for search than was predicted.

VOD, digital OOH and online display also fared well – as advertisers follow increasingly digital eyeballs. It’s a case of ad spend going where it’s simplest and most efficient to reach a target audience. The next few months will be interesting for all of us as, whatever happens with Brexit, the UK is becoming comparatively cheaper on the global market thanks to the weakening pound.

So with digital advertising and search proving easy ways for UK brands to target international audiences, there could be an albeit thin silver lining to the otherwise dark cloud of Brexit’s effect on business.

With the report highlighting growth of 9.4% in OOH spend, it is clear that OOH is increasingly viewed as a channel through which to deliver against both long-term brand building and shorter-term sales activation goals.

Advancements in digital OOH inventory and infrastructure have provided marketeers with a brand safe, data driven and transparent alternative or accompaniment to purely online ad formats in order to drive sales results. We are seeing more advertisers utilise the dynamic creative and near real-time audience buying opportunities to deploy activity in faster and smarter ways.

As digital OOH campaigns become ever more integrated with tactical activation in other channels such as mobile and social, the role of the medium is evolving to help solve the challenge brands face in delivering those immediate business outcomes alongside the brand fame at real scale that OOH has always delivered.

It’s great that brands continue to invest in marketing despite a potential economic downturn and the ongoing uncertainty around Brexit. It’s been shown time and again that those who continue to invest in their brand through downturns will stand the best chance of weathering an economic storm.

The latest AA/WARC figures also highlight that brands continue to diversify spend, in particular leveraging the digital offerings for traditional media such as VOD, Digital OOH, digital Newsbrands, and Online Radio. This is partly driven by increased scrutiny on the digital trading ecosystem, with particular concerns around brand safety – an area where traditional media players tend to have a stronger offering.

As brands continue to diversify spend, they should not lose sight of the need for appropriate creative for the medium in order to generate the greatest effects.