Report: Online ads account for over 78% of UK ad spend
April 25, 2024
The latest Advertising Association/WARC Expenditure Report shows that the UK’s ad market recorded a 6.1 per cent increase in investment to a total of £36.6 billion in 2023; the 13th annual expansion recorded in the last 14 years. The data also shows that online formats now account for over three-quarters of all UK ad spend for the first time.
New AA/WARC forecasts show advertising spend will rise by 5.8 per cent to reach £38.8 billion in 2024, though this represents a minor (-0.1pp) downgrade from January’s forecast owing to prolonged inflationary pressures on the market. Further growth – of 4.5 per cent – is expected in 2025, by when the UK’s ad market will be worth more than £40bn.
When compared to Europe’s largest advertising markets, the UK’s advertising industry was seen to have outpaced Germany (-0.7 per cent), France (+2.1 per cent) and Ireland (+3 per cent) last year, and is expected to repeat this in 2024. The UK’s ad market is on course to end the year some $20 billion larger than those of its closest neighbours.
The full picture in 2023
While UK ad spend grew by 6.1 per cent in 2023, this equated to a 1. per cent contraction in real terms after accounting for high inflation, a rate which slightly lagged the flat (+0.1 per cent) activity witnessed across the UK’s economy last year.
As estimated in January, online formats combined grew by 11 per cent to reach a total of £28.7 billion in 2023, equivalent to 78.4 per cent of all UK ad spend last year. Beyond this, out of home (+9.7 per cent) was the only other advertising medium to record growth in 2023.
The only major product sectors to record rising display ad spend (i.e. excluding search and classified formats) last year were retail (+5 per cent) and services (+4.7 per cent), the latter almost entirely attributable to a 6.6% rise in the entertainment & leisure sector.
The AA/WARC data also reveals actual investment for last year’s Q4 Christmas ad season, which topped £9.7 billion after achieving growth of 7.4 per cent year-on-year. This growth was led by digital out-of-home (+18.1 per cent) and BVoD (+15.9 per cent) as well as search (+12.9 per cent), as the traditional uplift in Golden Quarter investment was buoyed further by increased advertising activity during the Rugby World Cup.
Projections for 2024 and 2025
The AA/WARC dataset expects the UK advertising market to grow 5.8 per cent to reach nearly £39 billion in 2024. Broadcast media, most notably TV (+2.6 per cent) and radio (+2.3 per cent) are expected to return to growth, while the same is true for cinema (+2.5 per cent). Among digital formats, search (+8.9 per cent) and online display (+6.4 per cent) are again set to see the strongest rises, closing the year with a combined share of 77 per cent of all spend.
More favourable economic conditions should encourage advertisers to invest more in brand-building campaigns in 2024 and this, coupled with short-term stimuli such as the Men’s Euros in June, the upcoming General Election in the second half of the year and, to a lesser extent, the Paris Olympics in July, are expected to contribute to healthy growth in formats such as broadcaster video-on-demand (+14.1 per cent) this year.
The picture is set to improve further for more channels in 2025 as a rise of 4.5 per cent is forecast for the market as a whole. This includes an 11 per cent rise for BVoD, 6.4 per cent for search and 5.5 per cent for online display, as economic headwinds are anticipated to ease.
Stephen Woodford, Chief Executive, Advertising Association, said: “The continued shift to online advertising formats reflects the changing shape of our economy, with people increasingly shopping online as well as on the high street, and businesses striving to provide the best customer experience in all scenarios. The UK advertising industry is much respected around the world, which is why we continue to see the exports of UK advertising services grow, an important source of additional revenue for many advertising businesses in a domestic economy that has little-to-no growth.”
James McDonald, Director of Data, Intelligence & Forecasting, WARC, added: “Our latest survey of media owners confirms 2023 as a challenging year for most, with few properties recording gains and spend instead further consolidating within search and online display formats – particularly social media. Combined, these digital staples are on course to account for almost four in five pounds spent on advertising in the UK next year, up from a share of 51 per cent just five years ago. Our forecasts assume that the UK’s economy will begin to break from the pattern of stagnation that has come to define recent quarters. Easing inflation over the coming 18 months should encourage more favourable trading conditions within the advertising sector, facilitating growth across a broader range of channels in turn.”
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