AA/WARC adspend report: industry analysis

The latest AA/WARC report shows consistent year on year growth for the UK advertising industry, which is encouraging news as we enter 2019. Once again, the report reveals that even as traditional mediums show mixed performances, digital media continues to be the main driver of growth in almost every channel.

This is a particularly interesting space to monitor with regards to TV, with on-demand services predicted to grow a further 10.1% in 2019, building upon growth of 12.1% in 2018. However, according to our recent Mindshare Trends report, this doesn’t mean that advertising should necessarily be diverting spend away from live TV moments.

Based on research with over 6,000 UK consumers, we found that 63% of adults have streamed live TV online – rising to 80% for millennials. Far from diminishing the value of traditional mediums, the rise of digital is in fact strengthening it – and offering brands more opportunities to engage meaningfully with audiences as a result.

The latest UK Adspend figures released by AA/WARC (+5% this quarter) are indeed buoyant and cause for satisfaction, if not celebration. The annual rise in UK Adspend of 6% is strong, and appears to fly in the face of our uncertain economic and political climate, especially in light of the decimated retail sector, and multiple closures and concerns around manufacturing, automotive and service industries.

The growth is (predictably) led by a continued rise in online advertising (+10% year-on-year). The notable strength of digital radio (+25%) perhaps points to a return to more traditional values and consumer habits – albeit delivered via 21st century technology.

While it is encouraging that marketing chiefs are still backed with the confidence to invest, the growth cycle has likely peaked. I remain very concerned that (to quote the sage Rory Sutherland) the ‘Efficiency Bubble’ will not prove effective long-term; nor will it support ever-increasing Adspend. For advertising to be great again, it is not the ‘Martech industrial complex’, but creativity and insight, which will drive long-term investment and belief in advertising.

It’s encouraging to see Out-of-Home (OOH) continue on a steady trajectory of growth, illustrated by a gradual uplift in investment over the last two years. This demonstrates that, even in an unclear business environment, marketers still see the value in traditional brand-building activations to retain market share.

The report also notes the rapid growth of digital across the board – a trend which is also being seen in OOH, with the medium’s digital capabilities becoming increasingly sophisticated. In 2019, we expect to see further innovation in this space, allowing brands to access digital inventory more easily, and leverage a growing number of data points to deliver truly dynamic campaigns.

The growing investment in mobile is also being watched closely by the OOH industry, with marketers waking up to the fact that advertising effectiveness can be significantly bolstered when the two mediums work together. Indeed, a recent report we conducted with Exterion on the value of commuter commerce to the UK economy found that OOH acts as a powerful driver of purchases made on smartphones. Not only did we discover that 70% of UK consumers had made a purchase as a result of OOH advertising seen on their journey, but we also found that commuter spending is worth £22.8 billion a year.

When you consider that this amounts to 14% of total online spend in the UK, it’s clear that brands may need to rename Point-of-Sale advertising to the more appropriate “Point of Swipe” – which is anywhere a billboard is seen by a smartphone user.

The latest report shows a strong growth rate on digital spend in newsbrand environments – up 3.4% in Q3 2018 and forecast to increase to 8.1% in 2019. This is consistent with the increasing interest we are experiencing and reflects the growing preference by advertisers to reach audiences in brand safe and trusted content environments.

Quality editorial environments offered by newsbrands drive much higher brand performance, and combined with improved formats and targeting, are fast becoming a compelling choice for reaching engaged audiences at scale in a brand safe way.

It is refreshing to see that UK advertising spend has been strong over the last part of 2018 and is set on a healthy path for 2019, which mobile leading the way.

As for the OOH growth [7.3% for Q3 2018 on a YoY basis] it’s important to note that this positive number is comprised of both digital screens and traditional panels; if taken separately, the DOOH growth would certainly have been in double digits, which is incredible growth and shows the industry is continuing to move in the right direction.

Seeing how mobile ad spend outperformed the internet is also a testament to the importance of localised campaigns in digital marketing strategies. Brands are looking to connect with consumers where they are and with a contextually relevant message – making DOOH a natural choice for brands looking to leverage location based advertising in 2019.

The latest AA/WARC Expenditure Report for Q3 2018 is a glimmer of light for the advertising industry as it steels itself for the uncertainty of Brexit. Not only does it reveal the third quarter last year was the strongest in 3 years, but it also predicts further growth of 4.6% for the year ahead.

Nevertheless, this projection is based on the assumption that business is put first in any withdrawal agreement, and whilst the results are encouraging, they should not be cause for complacency.

Given that digital continues to lead the charge for overall market growth – with more personal platforms like mobile seeing rapid growth of 6% year on year – marketers should be focused on maintaining similar levels of investment overall but with a bias towards personal and addressable platforms to drive ROI and effectiveness. By linking data-driven, digital campaigns to specific and measurable objectives for clients, the industry will be in a better position to gain confidence from business leaders and trust from consumers even in an uncertain economic climate.

Even in the face of economic, business and political uncertainty, it’s hugely encouraging to see the advertising industry continuing to project strong growth. Digital advertising is certainly no exception. The reason for this growth is simple: brands are continuing to recognise online advertising as a market with significant untapped potential as advertising technology matures, and brands see ongoing value in the digital ecosystem. AI is one of the technologies that has pushed online to its current heights; it has enabled marketers to handle larger data loads and provided unparalleled insights for optimising campaigns and reaching audiences at scale.

As advertising across mobile devices continues to dominate growth – thanks to the audiences’ appetite for short-, medium- and long-form content – it’s expected the arrival of 5G will result in a step change in quality mobile ads too. Quicker speeds will allow for a more exciting creative reality, combining both data and creative to produce more engaging, tailored ads that deliver better ROI for brands. In this way – and even in the face of uncertainty – it’s highly unlikely we’ll see digital advertising growth slow down any time soon. If anything, we’ll see it increase as the technology evolves at neck-breaking speed.