UK Advertising Growth Slow But Steady In 2005

While the burst of the dot com bubble in 2001 affected actual advertising growth over the past three years, 2004 saw a significant turnaround in the fortunes of the advertising market. However, the underlying factors largely responsible for this, such as the major sporting championships, will not be repeated in 2005.

ZenithOptimedia predicts that in 2005, the UK will see a 2.4% increase in advertising growth, compared to last year’s forecast of 4.4% and 2.7% for 2003.

Universal McCann predicts a very optimistic year, suggesting that 2005 will see a 7% rise in advertising expenditure in the UK, compared to last year’s 6% increase and 3% for 2003.

Bob Coen, director of forecasting at the agency explained the dramatic forecast to MediaTel Insight: “We’ve got a lot of postponed advertising because the economic growth was slow in 2004. Now the economy is firming up advertising is finally firming up, when business is lousy people don’t want to put their money into advertising.”

However, other estimates are more conservative, with the AA predicting a 4.4% increase for 2005, in comparison to 2004’s prediction of 4.8% and 2003’s 2.5%. Global advertising group Interdeco confirmed, in their Ad Barometer report, a 4.1% rise in 2005, compared to 5.0% last year and 1.1% in 2003.

According to a report in The Times on Monday, Sir Martin Sorrell, chief executive of WPP said: “The market remains quite difficult in the UK. Overall growth will be below the 2 to 3% range we are expecting worldwide.” However he believes that, in Britain at least, the market is better than “a flat to slightly up” 2004.

Predictions by medium for 2005, focus on a further change in the television industry landscape, with Freeview continuing to sell well, leaving implications for BSkyB, the BBC and other broadcasters. The rising number of households with television access and the promise from commercial broadcaster ITV to peg prices at 2003 rates for the next five years represents “good value” in television advertising, according to ZenithOptimedia.

Previous fears from the advertising industry that the introduction of personal video recorders (PVRs) will cause a demise in TV adspend has been quashed by industry experts (see PVRs Penetration To Reach 30% By 2010), who argue that the technology is not common place yet and that fast forwarding has been possible for over twenty years with the emergence of the timer video controller.

The internet has been widely predicted to be the fastest growing medium in 2005. Since 2001, online advertising has more than trebled in size to reach £552 million and is expected to remain in the double digit range in the coming year. ZenithOptimedia, in particular, has forecast an increase of 11% for the medium in 2005 (see INSIGHTanalysis: Media Healthcheck – December 2004).

In summary the outlook for 2005 sees the positive trend set by 2004 continuing, albeit at a slower rate. While Universal McCann is highly optimistic for a positive year, other forecasters are more conservative with their predictions. Advertising expenditure in 2005 is forecast to grow by 4.5%, based on a consensus of recent forecasts compiled by MediaTel Insight. While this figure is not as strong as the 5.3% forecast for 2004, the outlook for the forthcoming year remains solid.

LATEST UK ADVERTISING GROWTH FORECASTS
	2003	2004	2005
Advertising Association (09/04)	2.5	4.8	4.4
Interdeco/Ad Barometer (11/04)	1.1	5.0	4.1
Zenith Optimedia (12/04)	2.7	4.4	2.4
Universal McCann (12/04)		6.0	7.0
Carat (01/05)		6.4	4.6
Average	2.1	5.3	4.5
Source: As above/compiled by MediaTelINSIGHT