GroupM claims the UK advertising market is set to see its eighth successive year of growth in 2017 when total spend will hit £18.6bn, although the WPP-owned media investment arm has downplayed its earlier growth forecast from 7% to 4.1%.
The GroupM report, released today (June 22), notes that amid the UK’s fast-growing media markets, TV investment is down; instead of an earlier forecast to remain flat in 2017, this figure has in fact been revised down by 3%.
A contributing factor to the overall modest growth prediction is GroupM’s conservative outlook on “pure-play" internet, which has gone from the estimated 15% in November to 11% predicted in the new forecast.
GroupM defines “pure-play” internet as digital advertising minus elements attributable to “legacy” TV and print brands.
"Online advertisers are big and growing supporters of TV but are not enough to offset falling investment from TV’s more traditional categories such as food, finance, cosmetics and retail, many of which face multiple pressures on sales and margins," reads the report.
Further, “pure-play” internet is still providing nearly all the net advertising growth in the market. Additionally, GroupM predicts that although ad revenue will contract to 4% in 2017, it should stabilize in 2018.
Although online advertisers remain supportive of TV as a marketing force, confidence is clearly offset by the pressures on sales and margins in more traditional categories such as food, finance, cosmetics and retail.
Further, advertisers are well aware of the diminishing TV audience from the 16-to-24 year old market. Although GroupM predicts 2017 will yield 59 billion TV ad impressions among 16-to-24 year olds in the UK, it is the evasiveness of their viewing habits that makes it difficult to rate or measure. GroupM predicts 2017 will yield a 10% drop in ad impressions among this age group compared the prior year – the lowest volume since the arrival of Sky Digital in 1998.
“We came into the year predicting zero revenue growth for TV, and now we are set at -3%, a dramatic change compared to TV’s outstanding performance of 10% growth in 2015. The ‘cost per view culture engendered by digital video, which prizes price above safety and quality, has fortunately not yet knocked off TV’s crown as a medium with the best-value cost per impression. We think TV’s present pressures are more cyclical, which is typical behavior in this sector and reflects the economic cycle, rather than structural issues,” said Adam Smith, futures director, GroupM.
“We had previously discounted Brexit as a drag on the economy, but the recent UK General Election has magnified rather than reduced uncertainty, in contrast to political and economic stabilization in the Eurozone. The is not helpful for growth when consumer and public finances are already under stress, and corporate investment subdued,” Smith added.
Looking forward, GroupM is forecasting for 2018 that UK media investment growth of 4.5% - including “pure-play” digital gaining two points of market share, will rise to 58%.
“Despite the challenging dynamics in economic and political arenas, our advertising forecast demonstrates the fortitude of the UK advertising market,” said Nick Theakstone, GroupM's UK chief executive.
“Sustained investment growth and advertisers’ embrace of automating technologies show the optimism and confidence marketers have for reaching the UK consumer digitally. Still, audiences are elusive especially younger ones and this challenge will only be solved by leveraging data insights throughout campaigns.”