Key online formats to dominate as UK ad market prepares for growth in 2024
By Zion Rufus
The UK ad market is bracing for a growth trajectory in 2024 as key online formats, particularly internet advertising, are set to play a dominant role in driving the industry’s expansion and shaping its future landscape.
The industry experienced a stable first quarter in 2023, with adspend reaching almost £9.0bn, showing a minimal year-on-year growth of 0.1%. This data was released in the latest AA/WARC Expenditure Report data which revealed a positive outlook for the total UK advertising market in 2023, with an expected growth of 2.6% to reach £35.7bn by the end of the year.
The first quarter of 2023 also witnessed key online formats experiencing growth, including search and online display, with a respective increase of 5.1% and 3.6%.
These formats accounted for a substantial 76.2% of all advertising spend during this period. While legacy media faced challenges, streaming platforms, particularly those owned by broadcasters, recorded strong results.
Broadcaster video-on-demand (BVOD) spend saw an impressive rise of 18.7% in the first quarter and is expected to continue posting gains in the forecast period. Online radio also witnessed improved growth with 7.6%, while digital out of home (DOOH) continued to post gains with a 6.8% increase.
James McDonald, Director of Data, Intelligence & Forecasting at WARC disclosed that despite macroeconomic headwinds, the return to growth in key online sectors during the first quarter resulted in an upgrade to full-year projections, reflecting more favorable trading conditions in the second half of the year.
The projections also indicated a noteworthy improvement since the previous forecast in April, signaling a return to growth for key online formats, particularly internet advertising.
Stephen Woodford, CEO of the Advertising Association, acknowledged the slight improvement in ad spend growth outlook, particularly in online forecasts.
However, he cautioned that high inflation continues to dampen consumer and business confidence, potentially leading to a real-terms contraction of nearly 4.3% in 2023 for UK advertising investment.
Woodford also expressed hope that the recent decrease in inflation will boost confidence in the latter half of the year and into 2024, facilitating the anticipated return to growth in the ad market.
Meanwhile, the surge in internet advertising is projected to account for 76.7% of all adspend this year and an even greater 77.6% in 2024, compared to 75.1% in 2022.
The digital landscape is playing a dominant role in shaping the advertising industry’s future, with online formats driving growth and engagement among audiences.
However, the outlook for 2023 reflects some challenges, including inflationary pressures impacting businesses and households, resulting in a projected -4.3% contraction to the market in real terms.
Despite these obstacles, sporting events such as the Women’s World Cup and the Para Athletics World Championships are expected to provide a boost to the UK advertising market in Q3, with TV spot, sponsorship, radio, and out-of-home segments witnessing adspend growth.
Additionally, the cinema industry is projected to recover further post-pandemic, recording a substantial 20.8% year-on-year growth this year, buoyed by the release of blockbuster films.
Looking ahead, the UK’s advertising market is forecasted to grow by an additional 4.0% in 2024, amounting to £37.1bn. While this represents a slight downgrade from AA/WARC’s April forecast, it signifies a promising +1.1% growth in real terms.
Highlighting the significance of advertising in supporting competition, innovation, and growth, Woodford emphasized the value that the industry brings to the economy and urged recognition of this ahead of the General Election next year.
With the digital era in full swing, advertisers and marketers are poised to leverage these formats’ potential to engage audiences and deliver impactful campaigns in the ever-evolving advertising landscape.
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