AA/Warc: UK 2021 ad spend growth doubles forecast due to e-commerce and TV boom
The e-commerce and TV sectors helped drive the UK ad market to 34.3% year-on-year growth for 2021 – almost double that previously forecasted by the Advertising Association (AA) and Warc
Key sectors drove record levels of ad spend in the wake of the pandemic / Alevision
The UK ad market hit a record £31.9bn spend in 2021. Earlier forecasts suggested the UK would see 18% growth. The data shows internet ad spend totaled £23.5bn in 2021, equivalent to 73.5% of all UK ad spend and a jump up of 11.7 percentage points from pre-pandemic levels in 2019.
It notes that despite disruption in the “usual relationship” between GDP and ad spend, certain segments of the sector outperformed expectations.
Just as e-commerce saw tremendous growth over the course of the past two years, the data shows that “internet ad spend totaled £23.5bn in 2021, equivalent to 73.5% of all UK ad spend and a jump up of 11.7 percentage points from pre-pandemic levels in 2019.”
The latest AA/Warc figures demonstrate that overall search including e-commerce was the strongest performer in 2021; at £11.7bn it beats April 2020’s projection (made during the onset of the Covid-19 pandemic) by more than £3.7bn.
And while questions around the viability of ad-supported television in the UK remain high on the agenda in the wake of the government’s proposed privatization of Channel 4, TV surpassed early expectations by almost £1bn. Meanwhile, online video overperformed expectations by approximately £2bn and, unsurprisingly, social media beat forecasts made at the start of the pandemic by around £2.3bn.
That record spend will be a balm to the brands and advertising companies in the UK that have been hard hit by the dual impacts of Covid-19 and Brexit. Despite that, the ongoing impacts of both global supply chain issues and war in Europe will have a cooling effect on growth in the near future.
Recovery and recession
James McDonald, director of data, intelligence and forecasting at Warc, said: “The Covid-19 recovery last year was buoyed in part by the release of pent-up investment on established online platforms – as well as maturing ones such as TikTok – and in part by the emergence of retail media as a major contender for marketing budgets. The latter trend bears the hallmark of a new era in advertising, one that is set to fuel growth over the forecast period and beyond.
“Be that as it may, economic headwinds create uncertainty ahead; the consumer is being stretched further than at any other time since the Second World War, conflict in Europe has stoked market volatility and has exacerbated supply chain pressures, and the prospect of a UK recession cannot be ignored. Given the market’s current momentum, however, we do not yet see this translating into an advertising recession over the coming quarters.”
That is aided by tentpole events in the advertising calendar. For the coming year the UK’s ad market is forecast to grow by 10.7% to £35.3bn, driven by a strong start to the year, higher CPMs and higher demand ahead of the Fifa World Cup.
Stephen Woodford, chief executive of the AA, said that the UK ”held its position in 2021 as the largest advertising market in Europe through the pandemic and is now the third-largest in the world.
”It just sits behind the USA and China. While further growth is forecast, inflationary pressures on the cost of advertising, and more generally due to the ongoing geopolitical uncertainties, mean we should be cautious.”
While those headwinds suggest that growth might be slower, it is notable that many of the fastest-growing segments have proven to be remarkably resilient to the impacts of the pandemic and other issues. The rapid rise of platforms such as TikTok, and the arrival of shoppable experiences across social media, mean that growth in those areas at least is all but assured.
Looking ahead, the AA and Warc estimate that other traditional media formats including national and regional newsbrands and magazines will see ad spend fall by 2023.