Over the past few months, there have been numerous reports indicating the advertising recovery is finally underway, but a closer analysis of the underlying figures reveals a different story and explains why many advertising agencies are staying subdued about the turnaround, reports the Financial Times.
Figures released yesterday by the Advertising Association revealed that advertising spend rose by 3.5% during the first quarter of this year, (see
UK Ad Spend Increases By 4.8% In First Quarter Of 2004), however when this is compared to growth rates in other sectors of the economy, advertising has been lagging behind. In fact, advertising has actually fallen and not risen when calculated as a percentage of GDP, reports Mike Yershon, chief executive of Yershon Media Assessment for the Financial Times.
Through the early 1990s, the advertising industry’s share of GDP had been rising steadily but between 1998 and 2003 advertising revenue fell behind when it grew by only 19.5%, compared with UK GDP which was up 28%.
From 1998 to 2003 the compound annual growth rate for total advertising expenditure was 3.6% and the internet, outdoor, radio and regional newspapers all experienced growth faster than this. Where as TV and national press struggled and fell behind.
Yershon explains that the reason for this is that the internet ‘was a new, exciting medium so it was bound to grow speedily, as advertisers became caught up in the dotcom boom’ and speaking of outdoor he said ‘[it] benefited from heavy investment in product quality by the major companies and a growing audience, owing to the number of car journeys increasing by about 2% a year.’
Targeting TV audiences has become increasingly difficult as viewers become more and more fragmented across numerous pay channels, which has led to advertisers being more cautious when investing money in this medium. While the success of the internet in providing up-to-the-minute national and worldwide news has had a detrimental effect on advertising revenues of the national press.
A recent survey carried out this month by the Chartered Institute of Marketing (CIM) revealed that confidence among Britain’s marketers had reached one of its highest ever levels and those in the business are certain the advertising recession has finally come to an end.
The CIM report went on to say that after an uncertain and hesitant recovery, UK marketers are planning to invest to make the most of the recovery and marketing spend is predicted to increase by the largest margin ever recorded.
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