Partner Article

Industry reaction: AA/WARC releases latest report on advertising spend

The latest AA/WARC report revealed that, despite recovering from Covid, the sector is now facing more uncertainty from the economic meltdown.

The first three months of the year showed a year-on-year rise of 28.3% in ad spend across all media, outperforming expectations by 7.7 percentage points. So, AA/WARC upgraded their outlook for the total UK advertising market by 0.2 percentage points to 10.9% growth.

The latest data suggests the UK advertising industry is on course to reach a total valuation of £37bn in 2023, a 4.4% increase on 2022. However, despite the positive results, when inflation was taken into account UK advertising had real-terms growth of 1.8%.

We spoke to leaders in ad land to get their reactions to this unexpected rise.

Catherine Aithal, Strategy Partner, The Specialist Works It’s encouraging to see the ad market is still growing despite currently operating in very turbulent times. We are all aware there will continue to be tough times ahead. We recently released an interesting report detailing, by media channel, the likely pressures facing advertisers over the rest of this year, and how clients can mitigate these. The key take outs are as follows. Firstly, stick to your strategy (if you can). If you have set your media plans out to answer your business objectives and these haven’t fundamentally changed, hold fast. Secondly, be open to new opportunities, new channels, new laydowns. Remember, even with small budgets, the cumulative effect of multimedia campaigns is always an advantage. And finally, book early. With the added complexity of the World Cup scheduled for the first time ever at Christmas, you want to get your media plans shored up now before inflation and availability become an issue.

Justine O’Neill, Senior Director, Analytic Partners The rosy headline UK ad-spend growth of 28.3% year-on-year masks the real picture of inflation-eroded margins and ongoing hard times ahead characterised by the rising cost of living and political uncertainty both at home and on the global stage. Now is the time for marketers to be really clear of the need to hold investment and balance short-term money-in with long-term brand building. Now is the time for brands to get their measurement in order to make the right, effective investment decisions, particularly as we near Q4 when media inflation and availability may become an even bigger challenge thanks to the World Cup and Christmas falling in the golden quarter for the first time. Brands need to prioritise recession proofing their strategies, through a mix of media and channel optimisation; remembering that using multiple marketing channels can increase advertising impact by 35%.

Ben Davis, Analyst, Econsultancy Q1 felt like the calm before the storm, with these strong ad spend growth figures, particularly in search, display and social, part of the ongoing rebound from the pandemic. The big tech companies are now seeing demand stutter; Twitter saw a decline in revenue in Q2, Snap says revenue is flat in Q3, and Google saw its ad business grow 11.6% in the three months to the end of June, down from a whopping 69% in the same period last year. Advertisers will try to temper budget cuts over the rest of the year by being more efficient with their online media spend, something which arguably isn’t as easy in an increasingly (third-party) cookieless environment. The rise of retail media is in part driven by advertisers looking for efficiency through so-called closed-loop measurement. Tech companies will no doubt respond to this push from advertisers for efficiency – just this week Google Ad Manager has launched a new solution, Confirming Gross Revenue, which allows advertisers to verify in a privacy-safe way that no hidden fees are taken in transactions on the platform. Retail will be a particularly interesting sector over the second half of 2022, with many retailers needing to sell excess stock online, and shoppers waiting for the best bargains or doing their holiday shopping early to take advantage of sales. These retail brands will have to be experts at multichannel marketing, integrating messaging, merchandising and CRM with their paid media strategy if they are to maximise margin and reduce waste.

Rachel Clarke, Founding Partner, Strat House The headlines from recent marketing and media spend reports are all saying the same – spending is up compared to last year. Digging into them, you can see it’s a far more complex picture. Last year we were still impacted by covid, so there is a recovery from this, but the early part of the year looked promising. Now we see increases in actual spend but this is in an inflationary market, with supply chain cost increases across the board for all sectors. What’s the actual inventory being bought rather than the spend? The outlook is still unclear; Unilever putting prices up by 11% is covering some of their increased spend as sales slow, but will it be enough? From a consumer perspective, the spend shows increases in the channels where the target audiences are increasingly found. This is digital – along with outdoor/cinema - as the country continues to get back out of the house. The next quarter reports will bring us more information. Will brands continue to build back though a slow down or will sales reductions translate into media reductions?

This was posted in Bdaily's Members' News section by Business News .