Advertising spend stable in Q1

The report showed that the UK advertising industry was spending £9bn in the first three months of the year and suggested that growth for the entire year would be 2.6%.

However, the report also said that the outlook for advertising spend for the rest of the year was now much improved, with an increase of 2.1 percentage points since the last forecast in April.

Advertising spend on the internet is also now forecast to account for 76.7% of all spending this year – and 77.6% next year ¬– in comparison with 75.1% in 2022, with search (+5.1%) and online display (+3.6%) both increasing.

The Women’s World Cup was expected to boost UK advertising this year, and cinema is projected to rise 20.8% year-on-year following the release of films such as Barbie and Oppenheimer.

Broadcaster video-on-demand (BVOD) spend rose 18.7% during the first quarter and is set to continue increasing over the forecast period, according to the AA and Warc.

Online radio also saw improved growth over the first three months of 2023 at 7.6%, while digital out of home (DOOH) was up 6.8%.

The latest data from the AA and Warc suggests the UK’s ad market will grow by a further 4% in 2024 to a value of £37.1bn.

This is 1.3 percentage points fewer than the AA and Warc’s April forecast but equates to 1.1% growth in real terms.

Stephen Woodford, chief executive at the AA, said: “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.”

James McDonald, director of data, intelligence and forecasting at Warc, said: “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.”

Reaction

Jane Ostler, executive vice-president global thought leadership, Kantar
The displacement to digital continues with solid growth in BVOD and other premium digital platforms including DOOH, and slight growth in other digital formats. But with inflation looking like it will dampen real growth in adspend for 2023, marketers need to take care not to lose salience, which can lead to losing sales. Maintaining media investments powers brand growth.

Richard Fuller, managing partner, growth, Finecast
Agencies and brands are, more than ever, looking to reach guaranteed eyeballs, at a time when many consumers are spending more time at home amid high cost-of-living. The progression of addressable TV ads is partly responsible for these strong growth figures – as custom audiences, who have custom content preferences, are now seeing targeted ads. This space is set to go from strength-to-strength as data-driven, customised ad content can be shown at the right time in the right place to the right audience, whenever, wherever and whoever that may be.

As reach, frequency and measurement further improve in coming months, we can expect this tech-powered revolution to continue for brand advertisers and the market as a whole.

Paul Kelly, director, Analytic Partners
Brands that stayed the course during the cost-of-living crisis and continued to invest in advertising will see the benefit of that investment in the months and year ahead while others who pulled back will be playing catch-up when consumer spend increases.

The current outlook of the latest AA WARC report reflects the pressure that brands and advertisers are under, but this shouldn’t mean that opportunities are overlooked. With confidence set to grow and adspend increasing, it is the perfect time for brands to look towards the Golden Quarter of Q4 and start planning 2024 as a valuable opportunity to invest effectively for commercial growth in both the short and long term.

Neil Cunningham, co-owner and chief executive, Cream
It’s reassuring to see the market has stabilised since AA/WARC’s previous report and unsurprising that spend remained flat as the macroeconomic headwinds continue to buffet the UK’s advertising industry, and businesses dig in their heels and buckle up for the rest of the year.

There are some pink rays of sunshine – Barbenheimer has been what cinema has been crying out for and as the audiences flock, so too does advertising investment. What’s particularly good for the industry is that cinema investment often leads the way in creativity, raising favourability for everyone. So the outlook for the rest of the year has improved – also aided by the return to growth of key online formats and the boost from the Women’s World Cup.