National newsbrand ad revenue: context is key
The latest adspend figures may have set alarm bells ringing for UK newsbrands - but delving deeper into the numbers, Warc's James McDonald says the longer-term picture is much less severe.
Advertising revenues for the UK's national newsbrands fell 11% to £1.2bn in 2015, £150m lower than a year earlier owing entirely to losses in print business, according to the latest results from the AA/Warc UK Expenditure Report, released this week.
A 2.5% rise in digital adspend (to £220m) could not offset the fall for print (down 13.4% to £1bn) last year, the report finds. However, we expect the overall rate of decline to slow to -5.9% in 2016 and -3.4% in 2017, stymied by an average growth rate of 7.7% in digital adspend and softer falls for print over the forecast period.
Warc receives ad revenue data direct from source, having conducted a survey of national newsbrands every quarter since 1982. As the survey has a 100% participation rate, the data can be regarded as an accurate barometer for the current state of the industry.
The double-digit decline in total ad revenue last year was steeper than we had initially forecast, owing largely to weaker-than-expected digital growth. Indeed, total digital ad revenues for national newsbrands were seen to contract in the fourth quarter of 2015; the first recorded instance. Full-year digital growth stood at 2.5%, with ad revenue of £220m an average £18m per title.
Display, which includes formats such as banner ads, video and native/advertorial content, and which accounts for 83% of the digital total, recorded adspend growth of 3.7% for 2015 as a whole. This compares to 24.6% growth for the wider online display market.
Classified ad revenue - the remaining 17% of the digital total - recorded its first year-on-year contraction in 2015, with a 2.9% dip equating to a loss of £1m. This is owed entirely to a reduction in digital recruitment adspend, which had been rising steadily until it decreased by 5.6% last year.
Challenging conditions for the online recruitment sector were seen across the UK advertising industry in 2015. Online recruitment specialists recorded adspend growth of 2.7% last year, although this was the lowest rate of growth recorded since we began monitoring the market 15 years ago (excluding an annual contraction in 2009 during the advertising recession).
Growth in digital recruitment ad revenue for business magazines was also lower than seen in recent years, at 1.1%, though the market is worth double that for national newsbrands.
We expect the nationals to recuperate much of 2015's loss from digital classified formats this year and, when combined with stronger growth for display, we forecast an overall rise of 4.7% in digital ad revenue in 2016. This growth rate is expected to increase to +10.7% in 2017, by when the market should be worth over £250m.
Alas, this will not be enough to prevent the overall decline in advertising revenue for national newsbrands this year and next, as investment in securing print display ads is expect to decrease further over the forecast period.
At -13.4%, the rate of decline in print ad revenue during 2015 was steeper than we had previously anticipated. Indeed, in absolute terms, the £155m of lost revenue recorded in 2015 was the most since the advertising recession in 2009. But in challenging times, it's important to maintain perspective.
When combining both national and regional titles, spend of £2bn placed newsbrand print as the third-largest advertising channel in the UK last year. On a global level, the dollar value of advertising in newspapers ranks the UK market as the fifth-largest, just ahead of India and a little further behind China.
When measured in real terms so as to account for inflation, we can see that the dollar value of the UK's newspaper ad market has contracted by 25.6% from 2012. Of the top ten largest newspaper markets worldwide, only Germany (-13.1%) and France (-19.5%) have recorded softer contractions, while Hong Kong is flat (-0.4%) and India has grown (+2.2%).
Closer to home, when looking again only at national titles, print display adspend in 2015 was larger than that for both radio and cinema combined. Print display accounted for 84% of the print total and 69% of all ad revenue for national newsbrands last year, but with adspend on formats 15.6% lower than in 2014, it was responsible for the entirety of the losses recorded for national newsbrands in 2015.
Conversely, classified adspend, which makes up the remaining 16% of the print total, was flat compared to 2014 levels. The rate of decline recorded has halved, or more than halved, each year since 2012 before reaching this plateau, and we currently forecast a rise of half a percent in print classified adspend this year.
Within the print classified total, spend on property ads rose 19.7% in 2015 to its highest level in eight years. This was the third consecutive year in which rising adspend on property classified was recorded, and comes amid a climate in which online property specialists are thriving.
Print classified adspend for both recruitment and motors recorded steep declines in 2015, but at only 7% and 3% of the total respectively, fluctuations in growth rates are amplified. Adspend on all other classified, just over three quarters of the total, was flat (+0.3%) last year when compared to 2014.
While classified accounts for a relatively small proportion of print, and by extension total advertising revenue for national newsbrands, the fact that spend has plateaued and, for some components, actually grown in recent years provides an interesting insight, for it shows that the format is proven to work for certain advertisers.
Last year many supermarket brands, including Morrisons, Sainsbury's, Tesco and Asda, spent around a quarter of their total ad budget on print, according to data from Nielsen. This share rose to 30% for brands such as British Airways and eBay, and a third for Lidl and Waitrose. The fact that print remains a core part of the media mix underpins our forecast for better years ahead for the industry.
Overall, we believe the rate of decline for total print advertising revenue (display and classified combined) will ease to -8.2% this year and -7.0% in 2017, closer to the rate recorded in 2013/14. When combining these projections with those for digital formats, we expect the overall rate of decline in national newsbrand ad revenue to slow to -5.9% in 2016 and -3.4% in 2017.
James McDonald is a research analyst at Warc.
Mediatel subscribers can also now gain access to adspend and revenue figures by medium and aggregated forecast trends by medium from AA/WARC, Carat, eMarketer, GroupM and ZenithOptimedia in the Media Landscape tool.