Feature: Uncertainty Continues For UK Advertising
New figures released this week reveal continued uncertainty for the advertising industry, with the US-led military attack against Iraq and the Sars virus looming large in the market during the first quarter of 2003. According to the Advertising Association, UK adspend totalled £3.4 billion for the first three months of the year, a 1.5 increase on the same period in 2002, but a 1.5% period on period fall in real terms.
Analysis of adspend figures over the last five years shows the market was hit hard by the economic fallout following the tragic events of 11 September. UK advertisers have systematically cut back their adspend in the wake of global economic and socio-political uncertainty and all platforms have since suffered the knock on effects. Tentative signs of recovery were seen late last year, although the Q1 figures appear to reflect further weakness in an already fragile market.
Bearish sentiment continues to loom large, but analysts are divided as to whether these latest figures signify a continuation of weakness in the advertising market, or merely a cyclical dip caused by the negative impact of the Iraq conflict.
Andrew Brown, director general of the Advertising Association, believes the figures reflect short-term market conditions and should not be taken as evidence of a turn-around in economic recovery. He comments: “The figures were unexpectedly depressed, largely as a result of uncertainty surrounding the Iraq conflict and the Sars outbreak. The advertising market has suffered particularly from the drop in advertising expenditure among airlines and US based multinationals.”
ISBA’s director of media and advertising affairs, Bob Wootton, also believes the latest adspend data not a sign of impending doom. He says: “The figures reflect a very short-term market with declines due to jitters over the Iraq war and low visibility. This weakness will probably continue to show in the second quarter although revenues will return to the market reasonably quickly.”
Analysis of advertising expenditure by sector reveals a mixed picture. The big success story was outdoor advertising, which bucked the broader industry trend with a 16.8% year on year increase in expenditure. Radio and television also experienced a slight upturn, rising by 2.1% and 1.7% respectively during the same period. However, some analysts believe the negative effects of the war were not priced into this quarter and will continue to affect the market in the second quarter of 2003.
At the other end of the scale national newspaper expenditure continued its historical decline, dropping by 2.4% year on year during the first quarter of 2003. Business magazines were also hit hard by the uncertain economic environment, falling 3.2% year on year.
Industry figures are divided over what is causing these trends. Wootton claims the surge in outdoor adspend can be attributed to the “last gasp” of the tobacco industry. However, Bill Wilson, operations director of the OAA, argues that the end of tobacco advertising will not prove as disastrous for the industry as many have predicted. He insists that tobacco’s swan song is not the driving factor behind outdoor’s strong performance and claims the growth is due to the increasing professionalism of the industry. He says: “Consolidation amongst contractors has increased proficiency in the medium. Outdoor now has a better profile which aids growth in the market.”
Brown agrees, commenting: “The Outdoor advertising industry has worked hard at improving its offering and effectively marketing itself to agencies and clients spearheading its growth in the first quarter.”
The lacklustre performance of national newspapers continued during the first part of this year and some analysts have attributed this drop in adspend to the extended coverage of the Iraq conflict, as opposed to reflecting a wider malaise in the industry. Wootton disagrees, believing that the decline of ad revenues at national newspapers is a long-term trend, which may be partly attributed to the increasing popularity of online advertising. However, he is positive the industry is taking steps to reverse this decline, claiming we are yet to see the effects of a wide range of marketing initiatives due to be spearheaded by the Newspaper Marketing Association.
The effect of the Iraq war on the advertising market is clearly difficult to quantify, undoubtedly there were a few advertisers who decided to pull their campaigns in the face of the extended news coverage and an environment swamped in the brutality of war. However, on the flip-side many newspapers experienced an increase in circulation during the conflict, which may well have encouraged advertisers. Television and online audiences also increased as people logged on and tuned in to wall to wall news coverage.
Looking to the future, market visibility remains low and optimism characteristically guarded, with continued assertions there are no certainties in advertising. Sir Martin Sorrell, chief executive of WPP, recently reiterated his belief that the advertising upturn will not take place until next year and it could be 2008 before the real boom arrives. However, looking ahead there are some long term trends which are expected to persist throughout the year.
Outdoor’s growth appears likely to continue, although the the OAA predicts that Q2 increases will not be as large as those seen in Q1, partly because the second quarter of 2002 was not as weak as the first. Direct Mail is also expected to rise steadily, although the fate of national newspapers appears to rest largely on the ability of the industry to market itself more effectively to advertisers. Radio continues to develop at a steady pace and analysts predict the increasing popularity of digital radio will provide a welcome boost to the industry.
The future for television advertising, which is by far the most lucrative sector, may well provide a few surprises, as the growth of multi-channel TV continues unabated. Significant changes in television advertising look set to continue and lower production costs, combined with the rise of highly specialised digital channels are tempting new advertisers towards TV. Online advertising is also developing rapidly and is still something of a “green field” for growth over the coming year.
Subscribers can access ten years of media news and analysis in the Archive