UK ad spend growth will slow to a snail’s pace in 2023

The AA/Warc report predicts media owners’ ad revenue growth of just 3.9% next year.

The UK advertising market is expected to grow by 9.2% in 2022 to a total of £34.9 billion, 1.7% less growth than expected for the year to July 2022. But there is even a significant slowdown expected for 2023. ?

Every six months, an AA/Warc report collects ad revenue data directly from media owners across multiple channels. Inflation pressures, squeezed margins and the cost of living crisis have raised the price of advertising in recent months, so just because ad spend is rising doesn’t mean marketers are buying more ads. . With this caveat…

There is only a 3.9% growth in media owner advertising revenue forecast for 2023 across the UK industry, to a total of £36.2 billion. This is a deterioration of 0.5% compared to the previous forecast. Meanwhile, online advertising is expected to take a bigger share of overall spending. At 74.0% for 2022, it will cross the three-quarters threshold to reach 75.2% in 2023.

Sector by sector

The fastest recoveries in advertising spend were naturally attributed to the hardest hit outdoor advertising (OOH) and cinema sectors, with the former at 46.4% and the latter at 2,208.2% (theaters closed during the pandemic, remember).

Television is the only one to have recorded a drop in its advertising revenues in the last quarter (-0.6%). It should be noted that television spending is diversifying into new channels (which broadcasters often still own) such as broadcast video on demand (BVOD) (+9.3%). In the last quarter, video on demand should progress ahead of the wider market with an expected growth of 4.2% as well.

According to IAB figures, online classifieds grew by almost a third and national newspaper brands increased by 9.1%, magazine brands by 3.3% and regional newspaper brands by 0.6%.

Provide

Despite the economic weaknesses, an exceptional Q4 is expected. In an unprecedented move, the World Cup has been moved from summer to winter. This huge event sees tens of millions in TV spending crammed into an already crowded festive window. As a result, advertisers expect a lucrative period, but less lucrative than if the two demand windows were separate.

There is good news. Ad spend for the fourth quarter of 2022 is expected to rise 4.5% from last year’s record to a total of £9.5bn.

Stephen Woodford, Chief Executive of the AA, offered strong advice for the sector ahead: “Looking ahead, political and economic stability is essential, given the inflationary and recessionary forces that affect all businesses. While businesses face these pressures, we see them continuing to prioritize advertising investments to protect their brands in exceptionally difficult market conditions.

Meanwhile, James McDonald, director of data, intelligence and forecasting at Warc, warned that higher costs would squeeze household budgets and advertising spending budgets. “Trading conditions are at their worst since the Covid outbreak, resulting in mixed expectations for the Christmas quarter.”

Despite subdued expectations, McDonald’s stressed that the expected growth would still be “impressive” and “nearly double the average rate of expansion before the pandemic.”

It seems that even with the slowdown in growth, businesses haven’t forgotten that advertising is a vital investment. Of course, with cash-strapped retailers like Made.com, for many, advertising just won’t be an option.

Read the 2021 report here if you want to compare and contrast the fortunes of the UK advertising market.

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