UK radio adspend growth signals strong year ahead
Warc's James McDonald explains how branded content is helping radio advertising to stay in such good shape.
UK advertising expenditure for radio spot rose 2.9% to £239m over the first six months of 2015, with total radio adspend forecast to reach £589m by year-end, according to the latest results from the AA/Warc UK Expenditure Report, released this week.
The radio adspend data in the Expenditure Report are provided each quarter by Radiocentre (formerly the Radio Advertising Bureau), who receive advertising revenue data directly from their panel of each month.
The data show us traditional radio spot (i.e. excluding branded content) had a strong start to the year, with adspend rising 8.2% to £122m during the first quarter. However, a slowdown was noted in Q2, with ad revenue down 2.2% from the previous year, to £116m.
This traditional spend was split 65:35 between national and local, respectively.
'National' radio advertising expenditure refers to advertising booked within the area of the M25, while 'local' radio refers to all advertising booked outside the M25. This ratio for traditional radio adspend has remained fairly consistent for the last 15 years.
Despite the second quarter dip in traditional ad revenue, spend during the first half of 2015 was up 2.9% from 2014, to £239m. This gave radio spot a 7.5% share of all display advertising expenditure in H1 2015.
We expect to see further growth of around 3.2% during the second half of the year, with full-year growth currently forecast at 3% this year and 5% in 2016, when spend should top half a billion pounds. This will, however, still be short of radio's adspend peak of £547m in 2004.
This is, however, purely by a traditional spot measure. Another element of radio advertising spend is branded content - output funded either in part or wholly by a brand rather than the broadcaster - which added a further £103m on top of the traditional airtime format in 2014.
Changes to the Broadcasting Code in late 2010 allowed for greater integration of commercial communications within radio programming. The most notable freedom granted by the amendments is that presenters can now make endorsements live on air, provided it is made clear to listeners that a commercial arrangement is in place.
This brought about a notable uptick in branded content ad revenue after a period of stagnation, with adspend peaking at £114m in 2012.
However, annual declines were recorded in 2013 (-2.8%) and 2014 (-7%), and we forecast spend on branded content to dip by a further 1.1% this year. This would give branded content a share of 17.5% of all radio adspend, down from a peak of 21% in 2012.
Be that as it may, the additional ad revenue coming from branded content, when added to that of traditional spot radio advertising, means the sector as a whole is expected to see growth of 2.3% this year and 5.2% next year, by which time radio adspend will have reached its highest total over the last decade and the second-highest on record.
Siobhan Kenny, chief executive at Radiocentre, commented on the latest results: "After a brilliant first quarter, radio advertising remains in excellent health and is going from strength to strength.
"The fact that overall revenue over the first half of the year was up 2.9% from 2014 illustrates how radio remains a robust advertising platform. Radiocentre anticipates further good news for our sector during the rest of the year."
James McDonald is a research analyst at Warc.
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