AA/Warc: Industry analysis

Momentum in the advertising economy has continued its upward trajectory in Q3 according to the latest AA/WARC report. What is interesting is the dramatic rise of SME adoption of advertising as an engine of growth. This is not only clear proof of the vibrancy of the advertising industry but also an indication of the broader health of ‘UK Ltd’.

A similarity between SMEs and the larger scale ‘digital endemic’ businesses (those whose consumer interface exists exclusively online) is the inherent digital bias of their investments. As these businesses expand and mature, so does their profile in expenditure towards a more plural mix.

Advertisers should welcome the revenue shifts in traditional channels towards their digital counterparts (most obviously TV to VOD and digital OOH). These will fuel further investment in the consumer experience as well as more addressability at scale. The latest phase of BARB’s Project Dovetail provides another layer of actionable data drawing attention to the availability of audience to VOD.

However, a word of caution: advertisers should be wary of too literally translating macro trends into direct behaviour shifts. These numbers show as much about the changing shape of our economy as they do advertising per se. And we know from our own Wavemaker analysis that there can be very significant category differences that are far from – and cannot be compared to – the ‘average’.

Entering the new chapter of 2020, it’s encouraging to see the UK’s resilience with ad spend rising for the 25th consecutive quarter in Q3 2019, despite this period being dominated by Brexit and the inevitable General Election. With the industry innovating at such a rapid pace, and digital expectedly being the main contributor of growth, it’s particularly great to see spend growing within the publishing and audio sectors.

Due to the increased scrutiny around transparency and safe environments for brands, publishing and audio have naturally come into their own. This paired with times of uncertainty for the UK, people are turning to quality journalism for facts, and there are more eyeballs than ever before on newsbrands which cannot be ignored. This provides us with a huge opportunity that I do not doubt will continue to lead growth.

What’s more from a digital audio POV, the brand safe environment they can offer brands and scale is impressive. This alongside the fast-paced innovations particularly seen around addressable and dynamic audio implemented by all sales houses is one of the main drivers of growth.

Despite the growth seen here and forecasts looking ahead into 2020, it is imperative that whilst structuring campaigns, the industry must consider the way in which audiences consume publishing and audio at the core of our strategies to take advantage of this growth and change in behaviours.

Mark Wilson, associate vice president, Analytic Partners

Despite another turbulent year politically, ad spend has risen again and it is positive to see brands continuing to invest and across a variety of channels.

But marketeers should continue to look at ROI and not be swayed by apparent channel trends. For example, digital OOH spends are consistently increasing and at a much faster rate than the more traditional static OOH. The shiny moving images would seem like a no-brainer choice, but when we measured relative ROI’s in our recent ROI Genome Marketing Intelligence Report we found static OOH often has a higher ROI for brands, posing the question: is digital always the right choice or are more factors at play whatever the channel?

Yes, digital OOH looks great, allows moving images and potentially more creativity, but as a client found recently, factors such as location of advertising and proximity to their stores had the biggest impact on ROI. And if digital OOH spend does continue to grow as well as predicted, creativity, relevance and contextuality will be crucial to its effectiveness.

The rise in digital OOH (^17.1%) and VOD (^16.7%) is not surprising given the allowance advertisers now have to get a much deeper understanding of viewership and exposure data–directly tied to offline sales behaviour as well as online behaviour like website visits, purchases or app downloads.

Given this rise however, it’s becoming more and more necessary to have access to aggregators or suppliers that simplify the media buying, reporting and measurement to reverse the trend towards fragmentation; facilitating appropriate penetration and frequency with consumers to get the most out of these channels and elevating them to from incremental inventory sources to primary channel considerations.

While TV sees modest growth, it’s important to remember ‘VoD’ is buoyed by live streaming via device through flagship programming such as football access via Sky Sports or Love Island through ITV Hub. The disparity of growth between the two mediums might not be as glaring as it seems, with VoD spend pillaging traditional TV trading methods.

The big subscription players (Netflix / Amazon) are still largely uncommercialised, meaning most of this growth is driven by broadcasters. If we look at the amount of VoD served across the TV which is circa 60% of impressions share), by no means is ‘TV dead’; it’s just being consumed in different ways.

Even though VoD share is still more than healthy, there could be signs of a plateau year-on-year. Looking specifically at 2017 versus 2018, 2018 versus 2019, we see a sizeable drop – yet TV has grown. Whether measurability (or lack of) could have something to do with this, the meteoric rise of the subscription players could be halting commercialised video investment.

Broadcasters have made VoD easier to trade which certainly affects growth. We’re no longer having two conversations: one around TV and one around VOD. Agencies and brands now talk in the language of AV and audience-first planning is more prevalent now than ever.

Christian Polman, CSO, Ebiquity

Adspend has remained surprisingly buoyant since the previous numbers came out on the UK’s advertising industry growth. It is encouraging to see that adspend has held up across most channels despite the Brexit uncertainty.

Advertising’s dynamism is shown by the growth recorded across many different formats, with particularly impressive performances in cinema, VOD, digital OOH, and online radio.

Two factors are set to further fuel the industry. First, a clearer picture of Britain’s relationship with the EU is emerging. Second, the rollout of 5G networks will continue to formulate the dynamics for continued digital leadership in the UK economy.

With just days to go before the UK leaves the EU, it is reassuringly clear that brands can continue to invest in a dynamic British marketplace.

With digital advertising underpinning the growth in UK ad spend, it’s now incumbent on us (agencies, media owners, platforms, trade bodies and advertisers alike) to drive industry best practice, transparency in the supply chain and quality management to ensure the medium’s continued success.

As suggested by these latest figures, digital as a channel is no longer the cheeky younger sibling of the media industry. It needs to mature and demonstrate that it is a responsible avenue for marketing investment, protecting consumer privacy, whilst still offering advertising solutions that deliver results for brands.

Given the uncertainty around Brexit and the future state of our economy, it’s reassuring to see strong signs of growth within the advertising industry.

What’s more reassuring, perhaps, is the continued popularity of digital formats, which is clearly driving overall market growth. Importantly, the results reaffirm a shift towards data-driven communications, which is crucial for any effective digital ad campaign.

But whilst data is key to achieving tailored, people-based messaging, marketers must remember that long-term value will hinge on also adopting a cross channel approach. This will mean leveraging customer data across all touchpoints, allowing for a connected and seamless customer experience.