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What we learned about UK ad spend from GroupM's 2020 media report

What we learned about ad spend from GroupM's 2020 media report

WPP agency GroupM has released its annual end-of-year forecast report detailing the biggest trends in media buying. Naturally, 2020 has offered up a lot more talking points than some of its previous iterations.

The Drum pulls out five fascinating points from the UK report.

North/South divide

  • GroupM kicked off the report with a look at the consumer wallet. The most fascinating point was a North/South equality divide it has observed.

  • In the context of the advertising economy, it observed the correlation between advertising growth and GDP growth across different regions in the UK between 1999 and 2018.

  • London’s R2 of 0.57 was found to be substantially above the country average of 0.50. The weakest regional figure was found in the North-East—its cities are Newcastle, Sunderland and Durham.

  • This serves as a stark reminder that the ad industry’s growth isn’t reflected by many of the consumers it targets. It’s worth keeping in mind when planning media.

Advertising ‘growth’

  • Annual growth of advertising is usually taken for granted. This year it wasn't. 2019 into 2020 saw a shift from 8.6% to -4.4%, the largest variance on record, as well as the largest contraction in the last decade.

  • The report read: “We continue to assume that ‘normal’ activity will return by the second half of the year, which pre-supposes that Brexit will not cause ongoing problems and that an effective vaccine will be widely distributed across the population.”

  • It’s a big assumption, but with a well-handled Brexit... and a successful vaccine rollout, it predicts 12.4% growth.

Media share

  • So where do the spoils of war go? GroupM sees the following. Total pure-play internet (68.5%), total TV (18.2%), total national newsbrands (5.2%), total outdoor (3.2%), total radio (2.2%), total consumer magazine (2.2%) and with cinema lamenting in last place at 0.5%.

  • Time at-home saw brands push further into internet channels, 2021, will assumedly see a slither of spend go towards struggling mediums like cinema, which will have less inventory due to a raft of closures.

  • There is an estimated 4.9% for ‘pure-play digital advertising’ in 2020, with an additional 12% in 2021.

Who was spending?

  • Small businesses had to pivot. Some had to advertise for the first time simply just to tell customers whether they are open for business, or to detail a digital shift.

  • The report read: “The extent to which small businesses have supported overall digital advertising growth in recent years is not entirely clear.”

  • Facebook and Google, with their mass awareness and easy-to-use tools, are the likely beneficiaries. The report indicates that the adoption of SME advertising may have been higher in the US than the UK. In the UK, the furlough scheme offered a safety net to businesses. Paired with more severe and consistent lockdowns nationally, UK businesses were more like to “hibernate”.

  • “Many of the UK’s small businesses could not or did not need to shift to digital advertising in the same way that we think many similar enterprises did in the US.”

  • “Third quarter financial results from Google and Facebook, both heavily skewed toward small business advertisers, suggest a strong rebound in small business advertising.”

  • But it is attributing a huge share of growth to US media and large D2C brands. This is not replicated by the UK high street clearly, footnoted with the recent troubles faced by Arcadia Group. “Larger brands rooted in the physical world are not growing their digital budgets at anywhere the average rates presented here.”

Where are they spending?

  • It predicts the worst decline in TV spending since 2009, at 10%. This is actually better than was anticipated earlier this year.

  • It said that traditional ad-supported television continues to do the bulk of marketers’ brand-building – naturally, the most popular subscription video on demand services don’t carry ads. Could that change?

  • E-commerce now accounts for 40% of UK retail. It anticipates the continuation of “rapid growth” rising around 50% this year and 66% next year, reaching £2.4bn in media owner ad revenue by 2024.

  • It assumes search advertising to remain flat this year, with growth hitting 7.5% in 2021.

  • Print media will account for 7% of media owners’ ad revenue in 2020, down from 9% last year. That’s a decline of 23% in 2020 and a 13% rebound the next.

  • Out-of-home advertising will decline 45% in 2020; “Much of that loss should be regained next year”. It’s a medium that is increasingly being bought programmatically and should benefit from that, as well as a lack of hurdles around consumer identity.

  • Cinemas saw an estimated decline of 80% for 2020; there will be a “strong rebound of 160% in 2021” bringing it 23% lower than pre-pandemic.

  • In audio 2020, the industry will fall by 16%. 2021 will bring a growth of 12% in 2021. “The effectiveness of audio-based media has rarely been in doubt, though its appeal has been somewhat limited, as the medium commands only 2% of industry spending.”

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