‘Key’ online formats forecast to return to growth
The UK ad market will grow by 2.6% to a total of £35.7bn this year, according to the latest quarterly Advertising Association/Warc Expenditure Report.
This is a 2.1 percentage point improvement on the previous forecast which was attributed to “key online formats” like search and online display returning to growth, with a 5.1% and 3.6% lift respectively. These online formats accounted for 76.2% of total adspend in the quarter.
The report anticipated online spend to make up more than three quarters (76.7%) of total spend this year and even more (77.6%) next year. This is from a base of 75.1% this year.
Over the last quarter, total adspend remained flat with 0.1% year-on-year growth, reaching £9.0bn. This is down to “inflationary pressures faced by all businesses and families”.
James McDonald, director of data, intelligence & forecasting, WARC commented: “With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry. That said, a welcome return to growth in key online sectors during the first quarter has been cause for an upgrade to our full year projections, with a forecast rise of 2.6% demonstrative of more favourable trading conditions in the second half of the year.”
Looking ahead
The report expected sporting events like the Women’s World Cup and the Para Athletics World Championships to provide “a boost” to the UK ad market in the coming quarter, particularly in TV spot and sponsorship, radio and out-of-home (OOH) advertising.
Cinema is expected to grow the most out of any media channel in 2023 with a projected 20.8% adspend lift compared to last year. This is partially down to the success of “Barbenheimer” which has recorded the most successful weekend for admissions since before the pandemic in 2019.
More longer-term forecasts for the rest of 2023 are “muted” with an anticipated real terms contraction of 4.3%.
Further ahead in 2024, the report predicted growth of 4.0% in 2024, meaning the ad market would be worth £37.1bn. This represents a downgrade of -1.3pp on the April forecast, but a 1.1% growth in real terms.
Stephen Woodford, CEO, Advertising Association, said while high inflation was continuing to “depress consumer and business confidence”, the recent higher-than-expected fall in inflation as a factor to hope confidence and the ad market would return to growth later this year and into next year.”