AA/WARC adspend report: industry analysis

Jo Lyall, MD, Mindshare UK

It is fantastic to see that this has been the strongest total H1 adspend since 2014, demonstrating the resilience of the media industry amidst a turbulent environment.

While it is not surprising that this growth is being driven by increased spend in online advertising, it is interesting to see that mobile accounted for over half of search spend for the first time in the second quarter.

Indeed, we’re increasingly seeing mobile being used as the glue between multiple mediums. With higher adspend on mobile, it’s possible that location data will be used as a vehicle for enhancing other media channels such as OOH (out-of-home) based on ‘real-time’ movement patterns. Not only that, mobile also has the potential to help brands by acting as the portal for new technologies such as Augmented Reality (AR).

In addition to growth in digital channels, it’s encouraging to see that more traditional forms of advertising such as OOH, radio and cinema are also growing and this reflects the value of tailoring advertising campaigns to the right medium in order to maximise output.

Jonathan Barnard, Head of Forecasting, Director of Global Intelligence, Zenith

Online advertising is continuing a remarkable run of growth, occupying more of advertisers’ budgets in the UK than anywhere else in the world, and the rise of online video means this is likely to continue.

But as brands invest more in targeted and personalised communications, it becomes more important than ever to maintain broad brand awareness through mass media advertising, so it’s encouraging to see growth in television, radio and out-of-home.

Stuart Taylor, CEO Western Europe, Kinetic

At a time of economic uncertainty, with shifts in the market predicted as a result of Brexit negotiations, it is encouraging to see that advertising remains an important investment for British businesses. It’s noticeable that while online adspend continues to rise, more traditional forms of advertising are also continuing to hold their own. The OOH (out-of-home) sector is a strong example of this, with the report forecasting a 3.6% growth rate for 2019.

Clearly then, OOH is expected to remain a valuable media opportunity for marketers. There is real opportunity to integrate OOH with other channels, especially mobile. Indeed, mobile presents the opportunity to target audiences based on context, such as location, and importantly, mobile and OOH enable advertisers to leverage insights about location to reach consumers at pivotal moments in their daily lives.

It’s exciting to see that with an increase in adspend for both mobile and OOH, huge opportunities lie ahead for advertisers to combine the strengths of multiple mediums to build unique and dynamic campaigns.

Kathryn Jacob, CEO, Pearl & Dean

The latest AA/WARC figures reflect the advertising industry’s healthy position, ad spend having risen 6.4% to deliver the twentieth consecutive quarter of growth. This is very reassuring news for the sector, especially during such a time of high uncertainty given Brexit negotiations have threatened businesses’ budgets.

Although we can’t ignore the increasing demand for online advertising as a contributing factor for such a surge in ad spend, marketers are still seeing the value in investing in traditional media advertising too. This is the case for cinema, which offers an unparalleled, immersive experience to rival streaming content online, and remains a popular choice with consumers.

As a result, it is forecasted for a 7% increase in 2019, compared to 3.9% in 2018. With year-to-date admissions having been the best since 2011 and such a strong slate of films coming up in the new year, 2019 is looking to be a very busy and healthy period for cinema advertising… and we can’t wait to get started!”

Simon Harwood, Head of Strategy, the7stars

This quarter’s excellent ad-spend figures are testament to the unshakeable resilience of the UK ad industry which, even in the face of impending uncertainty around Brexit, has continued to invest heavily in marketing channels across the spectrum.

Whilst the market is largely being driven by online spend, it’s hugely positive to see that the power of big-ticket media formats are not being underestimated by brands – particularly as we head into the festive period.

Despite these better-than-expected figures, however, the shadow of Brexit continues to loom, and as we enter the final phase of decision-making, we might not see this show of confidence lasting indefinitely.

To this end, the focus for marketers over the next few months must be to ensure consistency, by maintaining advertising budgets and thinking strategically about when to spend on short-term focused activation channels. Any break in communications could have a detrimental impact on long-term sales, but this will help them to maintain the positive brand perceptions they’ve worked so hard to build.

Ian Reynolds, Managing Director, KBH On-Train Media

The figures are reassuring, especially given the current context of uncertainty for many UK businesses.

Whilst the market is being driven by online spend, traditional advertising channels show a consistent and strong presence in the media mix – with Out-of-Home (OOH) growing 1.5% from Q2 2017. The importance of traditional brand-building through broadcast channels remains key to building long-term market share, and traditional media sectors’ growth is indicative of the industry’s continued faith in these channels.

As a shopping channel, mobile’s importance continues to increase, so it’s unsurprising to see that it now accounts for a larger proportion of search spend. OOH is a powerful, important trigger for driving immediate consideration and action – adding more traditional channels to the mix enables brands to connect the real world with online activity.

The UK is renowned for world-class advertising, with many such campaigns utilising traditional media. These positive figures indicate this is set to continue despite the current climate of uncertainty.

Thomas Byrne, SVP Agency Services EMEA, Merkle

The UK advertising sector is growing from strength to strength, with this being the 20th consecutive quarter of market growth.

Clearly, online advertising continues to dominate, as is highlighted by the multiple platforms that sit under the digital umbrella. Indeed, people based platforms like mobile continue to be increasingly valuable, due to its ability and flexibility to combine display formats, from video to image to text placements shaped around the personal nature of the platform.

The possibilities of mobile advertising – combining the potential of SEO, tech innovations, and the ability to gain insight from real-time data – allows marketers to deliver relevant content to individual consumers at the right time, and build long term brand awareness in the process. We believe mobile provides a window of opportunity for marketers to develop a unique customer-brand relationship, and look forward to further innovation in this sector as digital advertising continues to grow.

Carl White, Co-Founder and Group CEO, Nano Interactive

The fact that full year adspend forecasts have been upgraded for 2018 and 2019 – even as we enter the final months of decision-making over Brexit – is a fantastic show of confidence from the UK ad industry.

A quick look at the statistics around digital spend reveals that this quarter’s success is underpinned by marketers’ ongoing faith in the power of online marketing for driving effective and relevant advertising strategies that resonate with consumers across the country.

Meanwhile, half of overall search budgets were devoted to mobile this quarter for the first time, reflecting growing consumer confidence in shopping via hand-held devices. This has no doubt been enabled by advances in AI-driven search solutions, which are increasingly allowing marketers to identify consumers via their real time purchase intentions, and deliver relevant advertising instantaneously.

Despite this positive outlook, however, with the Brexit deadline approaching, it’s important that we do not lose sight of its potential to deter both business and consumer confidence. The next few months are likely to be filled with uncertainty, and marketers must therefore tread carefully, by preparing themselves for all economic eventualities.

David Coombs, Head of Strategic Services, Cheil UK

It’s interesting to see mobile for the first time accounting for over half of search spend. Mobile still has room for growth, yet marketers need to be focussing on new devices, like Alexa, Google Assistant or Samsung’s Bixby, especially given their role in the home. Smart assistants can only grow as use cases increase and price points drop. It’s clearly a huge growth area for ad spend.

In the future, we may start to see additional formats like IoT, voice and image search start to appear as a separate category in ad spend breakdown, once marketers have found a way to monetize new technology effectively.

In a time in which brands and marketers are under pressure to deliver strong, measurable performance across all of their marketing spend, the outlook from WARC shows that they are in good company by putting their money into digital advertising. The report shows that online advertising has driven market growth and that over $13bn will be spent in online advertising in the UK this year.

It has therefore never been so important for marketers to have transparency in where this significant investment is delivered and be able to accurately attribute performance across all channels. Delivering trust has never been more important for the industry if we want to see a 21st consecutive quarter of growth.