GroupM's 2019 forecasts show a UK media in the midst of transition

GroupM's 2019 forecasts show a UK media in the midst of transition

Digital advertising growth is to be responsible for boosting the UK advertising economy to £20.8bn in 2019, per GroupM’s latest This Year, Next Year report. The world's largest media investment group pegs digital advertising as being responsible for all net advertising growth, although it also notes that most legacy media are holding their own following a period of rediscovering their strengths.

In line with other UK ad forecasts, television ad spend is expected to grow ever so slightly, with 1% growth expected over the course of this year, compared to a fall of 2.4% in 2017. The report points out that, even in the face of aggressive moves into video content by other players, television has been especially good at demonstrating its value: “Ad-supported TV remains hands down the most effective advertising medium. It consistently and convincingly argues for its safety and certainty, with proofs of ROI.”

Despite that, it notes that television advertising is undergoing a transitionary period. As giants like Facebook and OTT services push heavily into video content, driven by brands’ and advertisers’ desire for convenience at scale, UK broadcasters are having to adapt their strategies to keep up: Earlier this month it was revealed that Facebook UK’s ad sales alone had passed Channel 4’s.

ITV, for example, which rode the wave of World Cup advertising in the summer, is predicting an 8% fall in ad spend over the festive period. Adam Smith, futures director at GroupM, believes that while the idiosyncratic TV trading model in the UK suits advertisers, TV companies and agencies, it also potentially hands competing mediums an advantage: “Share dealing suits advertisers for the freedom it gives them to subtract (and more rarely) add investment without heavy penalty, but it produces the reciprocal inevitability that the vendors will seek to optimise their revenue.”

ITV made an attempt to capitalise on advertiser reticence around digital ad spend earlier in the year when it announced an amnesty around late booking penalties, which are lucrative for broadcasters but look like a holdover from a pre-digital age compared to the ease of use offered by the bidding processes for digital ads. GroupM’s report also notes that the attempt was humstrung by C4 and Sky not joining in, although “it seems to us ITV AB deadlines have become less painful since then.”

Consequently, when it announced its half-year results in July, its chief executive Carolyn McCall set out the broadcaster’s plan to move away from being overly dependent on advertising revenue. Instead, the broadcaster seeks to have at least £100m in direct from consumer revenues in the future. For comparison, it made £890m from advertising in the first half of this year.

At the same event McCall set out the broadcaster’s plans to be ‘more than TV’, through the launch of a new subscription video on demand service (SVOD) in collaboration with other UK-based broadcasters. That’s exacerbated by early signs that the advent of widespread adoption of OTT services in the UK might not be additive to traditional broadcast as has been forecast, but instead a competitor, particularly in more affluent households.

A newfound focus on collaboration and measurements that compete with digital pure-plays is singled out elsewhere in the report, around print advertising. The authors point out that after years of each publisher going solo, the industry is getting better at ‘collective defence’ and selling the value of the medium as a whole, citing both PAMco and Ozone.

However, Smith believes print advertisers will continue to feel the adverse effects of belated cooperation for some time, telling The Drum: “The main threats to monetising ad reach are deteriorating sufficiency of reach, and the related failure to compensate for this by collective action. There is sadly a momentum psychology at work, fuelled by buy-side expectations that every negotiation starts with a negative, and that bookings can become ever-more short-term. This latter point is naturally most keenly felt by the print media with the longest lead-time – the monthlies.”

The report does reveal that GroupM is shaving its predictions for total 2019 growth to 4.8% from 5.1%. It also notes that a slowdown in pure-play advertising growth is “inevitable”, but that the advertising industry in the UK is ‘optimistic’ on the back of its digital advertising growth, despite the uncertainty surrounding Brexit.

Radio appears relatively inured from the growth of digital, with GroupM noting it is holding its audience - possibly due to the mutability of audio content - with spot advertising

Revenue set to rise 10% in 2018 and 7% in 2019. Smith says: “The pat answer for radio’s vitality would be supply and demand: it can theoretically keep increasing its ad load, but appears to have found a natural limit. If demand keeps on growing – whether more brands, more campaigns by existing brands, or both – then price and profits will tend to rise.”

The ongoing transformation of broadcasters like ITV and the industry-wide collaboration in print speak to UK media owners seeking to capitalise on the strengths native to their respective mediums, while also taking advantage of growing digital advertising revenue.

GroupM UK chief executive Tom George said: “Collaboration and measurement remain key topics for the UK alongside Brexit and GDPR in our advertising forecast for 2019, but in a sea-of-change advertising investment stays buoyant reaching unprecedented levels.”

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