The UK advertising industry is set to see its ninth successive year of growth in 2017 with investment tipped to increase by 4.8% in 2018, according to GroupM.
The forecast comes despite a series of headwinds throughout the year - including concerns around digital advertising, the impact of Brexit on the economy and slowing client spend - which saw revenues drop at the UK's biggest agency holding companies.
In fact, GroupM has predicted that 2017 will conclude better than expected, with investment totalling £18.9bn (5% growth, up from the 4.1% earlier predicted). In 2018, a 4.8% predicted increase will take total investment to £19.8bn.
“Advertising investment remains stable despite a fragile economy”, said Adam Smith, GroupM’s futures director.
While the UK's advertising market may be stable, a rollback in brand spend from giants like P&G, Unilever and more, has caused many of the UK's biggest agencies to slash revenue forecasts. Havas' UK operation recorded a 10.9% dip for its third quarter and Publicis Groupe reported negative organic growth of -1.5% in Europe for the third quarter of the year. WPP, meanwhile, lowered its full-year expectations for the third time in 2017 in October blaming slower client spending and short-term investment strategies.
Short-term investment strategies yielded a significant influence over GroupM's predictions around the growth of digital 'pure play' advertising. This medium will hold 60% share of UK ad investment in 2018, the media agency predicts, growing by 13.3% in 2017 and 9.8% in 2018. This growth is a result of rising digital audiences, growing e-commerce and marketer 'short-termism', where performance-focused digital media is harnessed to drive near-term return-on-investment (ROI).
The health of digital advertising signals that marketers have been undeterred by growing concerns around the safety and efficacy of digital advertising.
While some advertisers paused YouTube investment early this year as a result of brand safety concerns, GroupM estimates two-thirds of those UK ‘pausers’ have returned to normal investment levels. The other third may be lingering with addressable TV and other alternatives they found effective, noted the research.
While Google’s mea culpa meant some brands increased spend in traditional advertising formats - with both Channel 4 and ITV noting a jump in ad spend in the spring - it appears that was not enough to help grow traditional media's hold in the ad market this year. GroupM predicts that ‘legacy media’, including its digital components, will shrink 4.4% in 2017 and a further 2.0% in 2018.
For now, Smith said the focus of marketers remains "relentlessly short-term" and "arguably underweighted" relative to long-term brand building in broadcast media. This favours performance-oriented digital media, he claimed, which continues to be the most robust growth story despite concerns over measurement, transparency, brand safety and other issues.
Nick Theakstone, chief executive of GroupM UK, expressed concerns about pressures on marketers to overweight short-term ROI versus brand building for the long-term.
"It’s imperative they get the balance right," he added.
In part, digital advertising may also be beginning to exhibit price inflation as more brands crowd in coupled with the rising cost of data and technology to enhance quality and ensure viewability. “The larger digital looms in share, the more vociferous and voluminous the challenge around measurement, accountability and brand safety will be”, said Smith.
Per GroupM’s estimates, TV’s first decline in five years will amount to 2.9% in 2017, but is likely to stabilise in 2018 in a context of slower audience loss and attractive pricing. Linear TV is not naturally a young medium and in 2017, GroupM believes impressions among 16-to-24-year-olds will fall by 12%, and by 8% among 16-to-34-year-olds.
Some of this loss in viewership may be overstated due to poor measurement of audiences across diffuse TV platforms, the agency said, issues which will be fixed in part by Barb’s 30-platform Dovetail measurement, due March 2018.
The outlook for legacy media beyond television remains tough. GroupM trimmed its prior 2% forecast for out-of-home (OOH) advertising growth to zero in 2017. For 2018, the view is slightly more positive at +2%, if promised improvements in effectiveness, automation and efficiency bear out.
National newsbrands faired the worst in GroupM's predictions, estimated to decline by 12% in 2017 and forecast to dip by 8% in 2018. A new measurement standard that goes live in February, delivered by PAMCo’s Audience Measurement for Publishers, could offer green shoots of change for newsbrands by allowing planners to build schedules including Facebook Instant Articles and Google’s Amp.
Theakstone concluded: “It’s also crucial that the industry deliver better audience measurement to support media planning for performance and brand building alike. As ever, we lend our full support to industry initiatives like BARB’s Dovetail and PAMCo’s AMP while also filling the gaps we see, like scaling an accountable addressable TV market with our new business, Finecast”.