Report: Pandemic recovery boosts UK adspend
April 28, 2022
A report – UK Advertising’s Adspend Review: The Pandemic Effect – which marks the definitive full year 2021 Advertising Association/WARC Expenditure Report figures, reveal the extraordinary adspend growth seen during the recovery from the Covid-19 pandemic.
The UK ad market reached a record £31.9 billion (€37.9bn) in 2021, equating to growth of 34.3 per cent year-on-year. The latest AA/WARC full year figures reveal the 2021 ad market emerged £8 billion larger than April 2020’s original forecast of £24 billion set at the beginning of the Covid-19 pandemic. This growth is in part due to inflationary pressures on the cost of advertising but also a higher-than-expected growth in key forms of online advertising during the past year.
Three in every four pounds spent on UK advertising today is invested in one of a wide range of online formats – only China has an equivalent online share of this proportion. New data shows Internet adspend totalled £23.5 billion in 2021, equivalent to 73.5 per cent of all UK adspend and a jump up of 11.7 percentage points from pre-pandemic levels in 2019.
Notable shifts were seen in adspend, sector by sector, during the pandemic with the UK Government quickly becoming the UK’s largest advertiser to drive mass behaviour change. This shift is further examined in UK Advertising’s Adspend Review: The Pandemic Effect. It includes contributions from WARC, the global authority on advertising and media effectiveness; Credos, UK advertising’s thinktank; and industry perspectives from AA members, including Google, Tesco, News UK, UM, ISBA, as well as TV marketing body, Thinkbox. The review also notes the pandemic has seen a disruption in the usual relationship between GDP and adspend.
The latest AA/WARC data presents an upgrade to the previous forecasts for 2022. The UK’s ad market is forecast to grow by 10.7 per cent this year to £35.3 billion, driven by a strong start to the year, higher CPMs and higher demand ahead of the FIFA World Cup. In 2023, this is set to add an additional 5.4 per cent year-on-year to reach £37.2 billion, though economic headwinds – particularly in relation to cost of living pressures and supply chain disruption – mean this is liable to review.
The latest AA/WARC figures show search, inclusive of e-commerce, proved to be the strongest performer in 2021 – at £11.7 billion it beats April 2020’s projection (made during the onset of the Covid-19 pandemic) by over £3.7 billion. In addition, TV surpassed early expectations by almost £1 billion, while online video overperformed by approximately £2 billion and social media by £2.3 billion in relation to the forecasts made at the start of the pandemic.
The UK Advertising’s Adspend Review also contains commentary from Credos, highlighting the close link between Internet retail spend and online adspend. With online retail spend of $2,648 per capita, the UK has the world’s most avid online shoppers. In tandem, the UK ad industry is seeing an exponential demand for digital skills and talent to serve this demand.
Commentary from WARC concludes that the changes seen in the advertising market during the pandemic allude to an emerging structural shift, one which points to a new era of advertising with retail media poised to play a more prominent role in future.
“The UK has held its position in 2021 as the largest advertising market in Europe through the pandemic and is now the third largest in the world, behind the USA and China,” notes Stephen Woodford, Chief Executive, Advertising Association. While further growth is forecast, inflationary pressures on the cost of advertising, and more generally, due to the ongoing geo-political uncertainties, mean we should be cautious.”
“While lockdowns saw sharp declines in spend across some sectors, the pandemic presented our industry with opportunities to innovate and meet the public health challenges. The UK Government remained in pole position as the largest advertiser. Cover wraps in our print media informed the nation with ‘Stay Home’ public health messages; direct mail brought testing kits and essential deliveries to households up and down the country; and billboards showed the everyday heroes in our NHS.”
“Such innovation, creativity and responsiveness will be critical in the years going forward, as we build a sustainable future for our industry, and help businesses, large and small, build relationships with their customers,” he stated.
“The Covid-19 recovery last year was buoyed in part by the release of pent-up investment on established online platforms – as well as maturing ones such as TikTok – and in part by the emergence of retail media as a major contender for marketing budgets,” advises James McDonald, Director of Data, Intelligence & Forecasting, WARC. “The latter trend bears the hallmark of a new era in advertising, one which is set to fuel growth over the forecast period and beyond.”
“Be that as it may, economic headwinds create uncertainty ahead; the consumer is being stretched further than at any other time since the Second World War, conflict in Europe has stoked market volatility and has exacerbated supply chain pressures, and the prospect of a UK recession cannot be ignored. Given the market’s current momentum, however, we do not yet see this translating into an advertising recession over the coming quarters,” he added.
Industry reaction
Charlie Johnson, Vice President, International, Digital Element: “With such a boom in UK adspend – particularly online – finding trusted, quality data sources is now more important than ever. It’s crucial this additional investment isn’t wasted on bad data, which will ultimately limit further growth in the sector. Alongside this online growth, the lifting of pandemic restrictions in the UK means in-store-visits are on the cards again. Advertisers must make sure they don’t leave shoppers hitting the shops behind. Mobility data will be crucial in the coming months as brands continue to monitor shoppers’ real-time habits and determine the best way to link online and offline in a new digital era.”
Mari Kim Novak, Chief Marketing Officer, Yieldmo: “The increased investment in online formats highlights that marketers are not going back to the old ‘normal’ and it’s time to embrace change. As the UK has the world’s most avid online shoppers, they will expect brands to provide integrated seamless advertising experiences. Online ad formats need to be designed with the consumer in mind – responsive to user behaviour, and maximise engagement. This can be achieved by offering frictionless shoppable ad units that utilize more granular, intelligent predictive real-time data sets.”
Tony Ayaz, CEO, Scuba Analytics: “Whilst online ad spend continues to grow it needs to be measurable in order for brands to continue to justify their investment. Alongside this consumers expect personalised experiences and to deliver this marketers need to be able to understand their behaviours in an increasingly fragmented, omni channel environment. As cookies are sailing into the sunset marketers are turning to their first party-data. To be able to leverage this data though and understand the impact of their campaigns they need access to real-time insights that can drive business decision making. Siloed, stale data systems will hold marketers back, ad impact will be hampered and budget wasted.”
Harriet Durnford-Smith, Chief Marketing Officer at Adverity: “This may look like good news, but in reality, it means that marketers are going to have even more competition to stand out and be heard. With three in every four pounds now being spent online, the competition for share of attention is massive. The question now is, whether this increase in money is actually increasing performance?
“It is essential that marketers are delivering on increased budgets, and accurately reporting where and how they are utilising them. This all starts with data. Marketers that have already achieved a level of data and analytical maturity are in a far stronger position to communicate activity to clients and demonstrate the value of the increased spend on effectiveness.”
Richard Kelly, Chief Revenue Officer of Mindshare UK: “As the findings demonstrate, 2021 was a step in the right direction after the turbulence of the previous year. We’re seeing investment in online formats continue to flourish and further establish its influence in reaching once untapped audiences. The idea of the metaverse has sparked many interesting conversations surrounding the future of advertising and we expect to see digital formats continue to dominate as brands move away from more traditional advertising and begin to dip their toes into new uncharted territory.”
“We’re also seeing TV stand the test of time and out-perform expectations, proving the naysayers wrong. Excitement surrounding the future of TV has been reignited as opportunities continue to develop and diversify, as exemplified by Netflix announcing the integration of ads onto the platform. This means it’s certainly going to be an exciting year for the space, as the arms race between live and on-demand TV rages on without an end in sight.”
Ali MacCallum, CEO, Kinetic UK: “The expected 2022 forecast of a +31.5 per cent YoY change certainly reflects what we are feeling on the ground. Brands recognise that out of home audiences are back in full force, and it’s no surprise they’re turning to a combination of classic and digital OOH inventory to target existing and future customers. In our recent Mobile Pound research, we found that UK adults spend £179 billion a year via mobile devices while out of home, and therefore there is ever greater evidence of the power of OOH to drive online and physical sales.
“OOH consistently provides tangible value to brands and with the continued regulation and decline of previously effective online advertising strategies, we are feeling ever-more optimistic about the future of OOH. We expect this upward trend to continue as brands build familiarity to get through the potentially hard times ahead as cost-of-living rises. We are glad to see this optimism reflected in the report this quarter.”
Louis Connor, Business Development Director, Kepler EMEA: “Post-pandemic optimism has been curtailed by the rising cost of living, compounded by war in Ukraine – but fortune favours the brave. Brands have learnt that maintaining their advertising investment through a crisis will pay dividends later on and several economic downturns have proven this to be the case.”
“It’s fantastic to see this immense growth in adspend as investment continues to flow into digital channels and the rise of retail media continues to prove itself as a huge opportunity. However, with consumer spending anticipated to reduce, advertisers and marketers will benefit from re-aligning budgets towards brand-building from sales activation. Beyond the economic picture there remains persistent industry challenges – adapting to a post-cookie world, staying on-top of data-privacy obligations, and unlocking opportunities in commerce media to name only a few.”
Clare Dove, UK Group Commercial Director at Future plc: “The cost of living crisis is ushering in an extended period of uncertainty for consumers, so it is vital that publishers provide them with high quality, verified and trusted information to help them navigate the changing economic environment.
“Publishers should utilise their teams of editorial experts to deliver the most relevant insights and up-to-date deals to their readers. This will not only help them navigate soaring market costs, but will also provide advertisers with the most valuable spaces to reach consumers. For example, we know that consumers tend to base e-commerce purchases on their current needs and passions. In-house experts can check deals every 10-20 minutes, and publishers, keeping a close eye on consumer purchasing trends, can adjust their articles in response — a practice that will also mean the best performing products can be given standalone spotlights on websites and within editorial content.”
“Looking at specific ecommerce products bought across our media portfolio between 6th December 2021 and 7th January this year as an example, we saw that wireless earbuds were the most popular item in the technology vertical, with sales order value (SOV) of £112.7k, while gaming chairs were the best-selling product in gaming, with £32.7k SOV. This data gives publishers and advertisers the opportunity to focus content around highly popular verticals and passion-based products, to drive the most effective campaigns.”
Sivan Tafla, CEO, Total Media Solutions: “The widespread optimistic outlook from marketers is reflected amongst our publisher and advertiser clients, as we see a return to relative normalcy. While online spending confidently increases, there are still challenges to be faced such as ongoing supply chain issues, the cost of living crisis and war in Ukraine. Publishers that diversify their business models, adopt new business strategies, and expand product offerings will be in the best position to attract ad dollars and navigate these fluctuations.”
Mike Gordon, Chief Commercial Officer, Global: “The extraordinary ad market growth last year is testament to the industry’s determination and adaptability to changing consumer behaviours – and that creativity is continuing on. With inflation and geo-political pressures ushering in a new wave of uncertainty, marketers are still innovating and experimenting to make the most of their budgets.”
“During the pandemic, the UK Government set a great example for this; they experimented with different media formats to deliver important messages, efficiently and at scale. The ‘Stay Home’ campaign used a variety of channels, including outdoor, audio and direct mail to reach people multiple times throughout the day, at home and/or on-the-go. And whilst the same marketing mix won’t work for every brand, experimenting with a variety of channels will help to discover what works best and help prepare for any future industry or economic changes.”
Jamie Caras, Executive Regional Director & Head of Commercial Strategy: UK & Ireland, FreeWheel: “The TV ecosystem has gone through a tremendous evolution in the past decade, opening up new opportunities for both the sell and buy side. The increased adspend on TV is certainly a positive outcome of this. Online video viewing is continuing to grow, with streaming services in particular surging in popularity and smart TV sets driving growth thanks to the variety of content and flexible viewing options they offer when used to access connected TV platforms. Viewers have more choices than ever, and new offerings continue to be launched – including ad-supported services allowing consumers to enjoy premium video content without the price tag. As technology advancements make buying connected TV inventory even easier and more efficient, we can expect exciting times ahead for brands who want to be involved in the TV space.”