Thursday, May 30, 2024

UK advertising spend flat in Q1 with slight uplift in outlook for 2023; OOH grew 6.8%: WARC

Thursday, July 27, 2023

UK adspend reached almost £9.0bn in the first three months of 2023, with spend now set to grow by 2.6% to reach £35.7bn this year
London, 27 July 2023: The latest AA/WARC Expenditure Report data represent a stable first quarter for the UK advertising industry in 2023, with spend remaining flat (0.1% year-on-year growth) to reach a total of £9.0bn.

The outlook for the total UK advertising market in 2023 suggests that while growth will be minimal at 2.6% year-on-year, the outlook has improved (+2.1pp) since the previous forecast in April, with spend now expected to reach £35.7bn. These figures also reflect the return to growth of key online formats, with internet now forecast to account for 76.7% of all spend this year – and 77.6% next year – in comparison to 75.1% in 2022.

The muted outlook for this year in part reflects the inflationary pressures faced by all businesses and families, with the projections for 2023 suggesting a -4.3% contraction to the market in real terms.

Sporting events of the Women’s World Cup and the Para Athletics World Championships are, however, set to provide a boost to the UK advertising market in Q3 of this year when, most notably, TV spot and sponsorship as well as radio and out of home are expected to see adspend growth. Another channel set to see further post-pandemic recovery is cinema, which is projected to record 20.8% year-on-year growth this year, buoyed by the release of blockbusters such as Barbie, Oppenheimer and Mission Impossible: Dead Reckoning Part One.

The latest dataset suggests the UK’s ad market will grow by a further 4.0% in 2024, to a value of £37.1bn. This represents a slight downgrade (-1.3pp) from AA/WARC’s April forecast but equates to +1.1% growth in real terms.

Stephen Woodford, CEO, Advertising Association, commented: “This latest forecast indicates a slight improvement in outlook in terms of growth of spend, with the improvements in online forecasts being notable. However, with high inflation continuing to depress consumer and business confidence we may end up seeing a real-terms contraction of nearly 4.3% in 2023 for UK advertising investment. The recent higher-than-expected fall in inflation will hopefully continue and with that we will see confidence begin to build later in the year and into 2024, when the ad market is expected to return to growth.

“It is vital to recognise the value that advertising brings to the economy in supporting competition, innovation and growth ahead of the General Election next year. Together with WARC, we will continue to monitor advertising expenditure results and provide guidance for our industry and policy decision-makers within the UK Government.”

The full picture in Q1 2023

The latest figures reflect key online formats returning to growth including search (+5.1%) and online display (+3.6%) in the first three months of this year. These two formats alone accounted for over two-thirds (76.2%) of all advertising spend during the first quarter.

While legacy media had a challenging quarter, streaming platforms, particularly those owned by broadcasters, recorded strong results. Broadcaster video-on-demand (BVOD) spend rose 18.7% during the first quarter and is set to continue posting gains over the forecast period.
Online radio also saw improved growth over the first three months of 2023 with growth of 7.6%, while digital out of home (DOOH) continued to post gains (+6.8%).

James McDonald, Director of Data, Intelligence & Forecasting, WARC, commented: “With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry. That said, a welcome return to growth in key online sectors during the first quarter has been cause for an upgrade to our full year projections, with a forecast rise of 2.6% demonstrative of more favourable trading conditions in the second half of the year.”

Media Q1 2023

year-on-year

% change

2023 forecast

year-on-year

% change

Percentage

point (pp)

change in 2023

forecast vs April

2024 forecast

year-on-year

% change

Percentage

point (pp)

change in 2024

forecast vs April

Search 5.1% 6.1% +4.4pp 5.2% No change
Online display* 3.6% 5.2% +3.5pp 5.5% +0.2pp
TV -7.2% -1.4% +0.6pp 2.0% +0.4pp
of which BVOD 18.7% 17.3% +14.8pp 10.1% +6.5pp
Online classified* -22.3% -14.2% -6.7pp -2.6% +0.1pp
Direct mail -16.6% -10.8% -4.8pp -4.0% No change
Out of home 5.1% 5.7% +0.8pp 6.8% +0.9pp
of which digital 6.8% 7.5% +1.5pp 8.3% +1.2pp
National newsbrands -6.4% -5.9% -0.7pp -3.6% -0.6pp
of which online -4.4% -1.4% -2.4pp 1.6% -0.7pp
Radio -5.5% -1.4% +0.2pp 0.8% No change
of which online 7.6% 11.8% +9.1pp 3.7% -0.4pp
Regional newsbrands -14.1% -10.5% -4.7pp -2.1% +2.8pp
of which online -10.3% -7.0% -6.2pp 3.5% +2.8pp
Magazine brands -7.1% -7.1% -3.9pp -1.5% +1.1pp
of which online -11.0% -7.0% -7.9pp 2.4% +0.8pp
Cinema -7.2% 20.8% -16.4pp 10.1% -2.9pp
TOTAL UK AD SPEND 0.1% 2.6% +2.1pp 4.0% -1.3pp

Note: *Broadcaster VOD (BVOD), digital revenues for newsbrands, magazine brands, and radio broadcasters are also included within online display and classified totals, so care should be taken to avoid double counting. Online radio includes targeted in-stream radio/audio advertising sold by UK commercial radio companies, together with online S&P inventory.
Source: AA/WARC Expenditure Report, April 2023.

The Advertising Association/WARC quarterly Expenditure Report is the definitive guide to advertising expenditure in the UK with data and forecasts for different media going back to 1982.

The executive summary of the report can be downloaded here

The latest figures are now available to AA/WARC Expenditure Report subscribers on the recently launched AA/WARC adspend hub. Verified market data across more than 150 series covering major media and product sectors can be visualised in a new dashboard, making insight simple to surface, and a library of over 50 dynamic articles ensures readers always have access to the latest dynamics within their sector.

Published on Thursday, July 27, 2023 at 11:25 PM

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