AA/WARC adspend report: industry analysis

Mark Holden, Starcom, Global Strategy Director

It’s a testament to the strength of the advertising industry, and to the value of advertising to growing businesses, that adspend continues to grow in the UK despite recent headwinds – the uncertainties of Brexit negotiations, a challenging high street retail climate and inflationary pressures on discretionary spending.

It is also a reflection on how the sector has evolved over the past decade. Driven principally, but not exclusively, by digital platforms, the barriers to entry for advertisers of all sizes and shapes has come down.

The combination of self-serve ad platforms, shared-risk advertising models for new advertisers, new solutions like AdSmart that bring traditionally expensive forms of advertising to niche or local brands, and the blurring of trade activation budgets into e-commerce advertising, has helped to open up the sector to new sources of revenue that have had the net effect of sustaining a healthy and vibrant sector in the UK.

The trend for yet another year of growth in advertising spend is set to continue. With consumers set to feel richer, following low unemployment, inflation heading towards 2% and interest rates looking increasingly likely to either stay put or increase by 0.25.

This growth will only be compounded if the advertising sector continues to strive for greater transparency and governance in the digital supply chain.

Celine Saturnino, Chief Commercial Officer, Total Media

These results reflect the ongoing trends both in consumer behaviour and advertiser trust. The pressure on the market to deliver more effective customer experiences in brand safe environments is reflected in the growth of less intrusive formats, such as in-feed and outstream, as well as by the rise of investment in digital newsbrands, which saw an increase of 19% in 2017.

With the approach of GDPR and existing trends towards buying programmatic direct, we expect to see further boost to the revenues of trusted environments such as these.

It’s great to see digital advertising revenue continue to be in rude health in light of some significant and persistent challenges within the digital ecosystem. This speaks to the ability of digital to continually deliver against performance metrics – particularly short term metrics which often become favourable during periods of marketing budget depreciation – and for investment to continually follow eyeballs with mobile growth leading the pack.”

Simon Harwood, Head of Strategy, the7stars

This record-breaking run of spend growth points to a remarkably robust and resilient UK ad industry.

After a relatively sluggish start to the year, the Q4 year-on-year growth is particularly eye-catching, with the astonishing 6.2% growth surpassing all forecasts and confirming that the Christmas ad season is the UK’s ‘Super Bowl’ point in the year.

Beyond TV’s recovery from an especially challenging first half of the year, the main story is one of continued digital growth driven by mobile, as ad pounds follow incremental media moments delivered into the hands of consumers.

However, it is also noteworthy to see how digital spend for news brands is offsetting some of the decline in print spend, and that the overall decline in news appears to be bottoming out as we look ahead to the next year’s forecast and beyond.

There are also some unsung heroes, with radio and cinema looking very strong into 2018, and OOH reporting ongoing steady growth.

Of course, these figures need to be viewed in the shadow of Brexit and in the context of powerful economic growth outside of the UK, where global or European marketing budgets are increasing. The weak pound may even be artificially pumping up relative UK ad investment from clients with multi-national budgets.