UK advertising trends have become increasingly complex over recent months. Understanding what’s driving growth over the short, medium and long-term is a challenge, but one that’s essential if brands and agencies are to optimise their investment and media owners are to respond to market demand.

The Advertising Association/Warc Expenditure Report is the definitive measure of advertising activity in the UK. It’s the only source that uses advertising expenditure gathered from across the entire media landscape, rather than relying on estimated or modelled data.

How did Q1 2017 shape up? Here’s the headlines…

Q1 saw a landmark high for internet advertising which now accounts for over 50% of total advertising spend

Ad spend growth continued to be driven by internet advertising (+10.1% year-on-year) which accounted for over half of total spend for the first time, with one in four pounds now spent on search.

Digital formats performed well across the board, up 25.4% for national newsbrands, 8.1% for radio and 27.6% for out-of-home growth.

Responding to the headline Vanessa Clifford, CEO of Newsworks said:

“News-brands’ digital ad spend growth – up 25.4% on last year – shows that advertisers recognise and value the quality context and accountable environments that news-brand publishers provide online.”

UK advertising spend starts 2017 in growth, despite a temporary TV slowdown

UK advertising expenditure grew 1.3% year-on-year in Q1 2017 to reach £5,318m – the 15th consecutive quarter of growth, according to Advertising Association/Warc Expenditure Report data published today.

Overall market growth was despite a drop of -6.2% in television advertising, its steepest fall since 2009. However, TV ad expenditure is forecast to recover in 2018 with 2.5% growth. Ad spend growth continues to be driven by internet (10.1%), with mobile spend (36.2%) particularly strong. Cinema recorded an outstanding quarter, growing 27.6% year-on-year in Q1 and outperforming forecasts by +20.0pp.

2018 World Cup is likely to boost ad spend in the wake of Brexit

The full year outlook for 2017 has been downgraded by -0.5pp to 2%, but is forecast to bounce back in 2018 at 2.6% growth, driven by the World Cup and a likely improvement in certainty around the terms of Brexit.

Advertising Association & WARC Expenditure Report Q1 2017: The Headlines

Stephen Woodford, Chief Executive at the Advertising Association said:

“As business sentiment suffers, it’s no surprise to see ad-spend come under pressure – but the market overall remains resilient. Beyond these numbers, our sector is a huge source of inward investment and exports and should be a priority for Government as we focus on business beyond Brexit.”

James McDonald, Senior Data Analyst at WARC commented:

“The latest data show that large retailers – particularly supermarkets – and major food brands reined in their TV spending by 25% during the first three months of 2017, instead committing to cutting prices on the shelves as household expenditure wanes.

“Higher inflation and slow wage growth has put a squeeze on consumer spending, while business confidence has weakened following the unexpected and indecisive general election result in June. These underlying stresses have resulted in a downgrade to our full-year expectations for UK ad market growth, almost all of which will come from digital formats.”

 

Check out the full report here.

 

How is the industry responding to the findings? We caught up with some of our members to find out.

 

“It is clear from the data that many important, long-term, brand advertisers are coming under increasing pressure from disruption and from weakening consumer confidence. As mobile and online video grows, it’s vital therefore that standards of measurement and accountability improve to give advertisers greater confidence in their brand-building investments”
Phil Smith, Director General, ISBA

 

“After the referendum and general election results, a cautious overall YOY picture for Q1 is not entirely surprising. In Out of Home, the flexibility of Digital Out of Home saw a significant 28% growth vs Q1 2016, offering an alternative to wait-and-see sentiments” 
Tim Lumb, Insight and Effectiveness Director, Outsmart

 

“With Brexit negotiations in the early stages, advertisers should also be looking to balance their long term brand building and short term sales activation budgets at a 60:40 ratio to maximise the effectiveness of their ad-spend” 

Patrick Mills, Director of Membership and Personal Development, IPA

 

“The digital advertising market continues to show exceptional growth as advertisers increasingly recognise digital’s unique ability to reach and WOW consumers. In 2016, digital was the largest media channel, accounting for 48% of the annual ad spend at £10.3 billion, up 17.3% year-on-year. Mobile is a key driver behind this growth. Up 84%, video and social formats are also growing, giving advertisers both the reach and the opportunity to do something creative and engaging to build their brands”
Jon Mew, CEO, IAB UK

 

“The continued robustness of radio audiences, increased radio listening on new platforms such as Amazon Echo, and the fact that it is a safe environment for advertising are all reasons for radio’s health and ahead-of-market performance”
Siobhan Kenny, CEO of Radiocentre

 

At-a-glance media summary, Q1 2017
• Internet adspend rose 10.1% during Q1 2017, mainly driven by mobile which experienced a 36.2% year-on-year increase in spend.
• Television adspend dipped by -6.2% in the first quarter of 2017, with a decrease of -7.2% for spot advertising. Total TV spend is expected to dip -1.9% this year, before the losses are regained in 2018.
• Radio adspend dipped -0.1% despite an 8.1% increase for digital ad formats during the quarter.
• Out of home (OOH) spend contracted by -0.6% year-on-year during the first three months of 2017, despite a 27.6% rise in digital ad expenditure.
• National Newsbrands’ combined ad revenues fell -6.6% during Q1 2017. However, this was the industry’s strongest performance in two and a half years, with digital (up 25.4% year-on-year) now accounting for just over a quarter of ad revenue.
• Regional Newsbrands’ ad income dropped across print (-18.8%) and digital (-2.7%) formats in the first quarter of 2017, with combined revenues down -16.0%.
• Magazine brands recorded losses in income from both print (-16.1%) and digital (-8.9%) ads in Q1.
• Cinema adspend rose 27.6%, making it the only non-digital medium to grow during Q1 2017.
• Direct Mail adspend was down -1.5% in Q1 2017, 7.5 percentage points better than forecast.