The UK Is Poised to See a Massive Wave of Ad Spend

After the Covid-19 pandemic cratered marketing budgets more significantly than any event in the modern era, there's an understandable desire to figure out what's to come. Attempting to predict events beyond three months might seem like outright folly, but ad spend forecasts and reports are emerging in rapid succession—and seem to agree on a few consistent findings. In the U.K., these forecasts offer glimpses of hope for the coming year, especially as the digital sector largely bucked the Covid-19 recession and is only likely to carry on attracting greater spend moving forward. With new-business pitching seemingly in overdrive, it would seem a tsunami of spend may be on the horizon—if the U.K avoids further pandemic disruption. The impact of Covid-19 and boycotts Highlighting the disruption over the past 12 months, research from advertising software company Mediaocean showed retail spending during the so-called Golden Quarter of 2020 (October through December) declined year-on-year by more than 20%, which paints a picture of how grim the past year has been. However, by the end of Q1, ad spend had jumped 31% for the year and is expected to increase again in Q2 and Q3 due to social platform pauses and boycotts initiated after the Black Lives Matter protests last summer. That pause in spend contributed to declines in Q2 and Q3, 2020, of 18% and 17%, respectively. The staggering growth of podcast spend indicates the growing opportunities for brands in the audio space.—Stephanie Claxton, PwC “This recent growth is partly about renewed business confidence, but it also shows how advertisers are placing yet more focus on closed ecosystems. It’s important to remember that, as marketing budgets are opened up, we’re not returning to a pre-pandemic normal,” outlined Aaron Goldman, CMO, Mediaocean, to Adweek. “Consumers have been heavily reliant on digital and social commerce for the last year, of course. Smart businesses will be investing to ensure that they have the data to track these behavioral shifts, are agile enough to adapt to them, and ultimately make sure that they’re selling where buyers are buying.” This chart from Mediaocean shows spend month on month throughout 2020 and 2021. U.K. marketing beginning to upturn The quarterly IPA Bellwether report on U.K. marketing budgets revealed that the pace of reductions in spend was among “the quickest ever recorded” during 2020. And 2021 saw a further decline in the first quarter, albeit more "softly" than last year, per the report. However, forecasts moving forward see increases in spend as Covid-19 restrictions ease and businesses begin to feel a form of recovery. During Q1, the report saw a quarter (25.7%) of those businesses surveyed admit to having decreased their ad spend, though 14.2% recorded an increase. IPA Bellwether shows adspend results for 2020 The Bellwether Report for Q1 broke down U.K. budgets into sectors highlighting the largest decline to the start of the year It registered event budgets down by 43.2% on the previous year, a smaller decline than registered the previous quarter, which was down 62.9%. Despite this, advertising spend is set for healthy gains with a net balance growth of 17.4% increase predicted, the strongest growth recorded since 2018. The main increases are expected across Main Media Advertising (10.1%) Pubic Relations (7.4%) and Direct Marketing (6.8%). However, further cuts are expected in Events (-28.4%), Other Marketing (-5.4%) and Market Research (-4.95). IPA Bellwether spend by sector for 2020 With the vaccine rollout still taking place and hope that will mean no future U.K. lockdown measures, there is a predicted rise of 3.5% in ad spend for this year and a further rise of 6.9% next year as the economic recovery begins. “Without a doubt, the improvement in budget plans from the previous survey period will have been supported by the release of the U.K. government's roadmap to relaxing restrictions," said Eliot Kerr, economist at HIS Markit and author of the Bellwether Report. "It has allowed businesses to look beyond the current climate and begin to build towards a time when demand will recover. If all goes to plan, a strong economic recovery should see ad spending rise sharply in the second half of the year,” Agile formats with short lead times were seen to flourish last year, particularly within social media and e-commerce environments.—James McDonald, head of data content, Warc Joint research from Warc and the Advertising Association is far more positive having claimed that there will be a year-on-year increase in U.K. spend levels of 15.2% to reach $37.5 billion (27 billion pounds), offsetting the decline of $2.5 billion (1.8 billion pounds) for last year with further growth of 7.2% predicted for next year. That level of growth would bring the market to a record spend for the U.K. of $40 billion (29 billion pounds) overall, it claimed, adding that to be the strongest recovery of any market internationally. Europe is expected to be one of the leading regions for advertising investment growth year-on-year, behind only Asia Pacific. Warc's adspend investment chart for 2021 Media sectors most adversely affected by the pandemic—such as cinema, digital and traditional out of home—are predicting spend growth too as physical limitations by the government are withdrawn. Cinemas are set to reopen in the coming weeks, with media buyers having previously told Adweek of their confidence in a return. Cinema will grow at 266.8%, digital out of home at +52.3%, and traditional out of home at +14.5%, the report says. Meanwhile, online classified investment will increase by more than a fifth (20.4%) as recruitment begins to ramp up again too. Despite an upturn, media in 2021 is not expected to recoup last year's losses, even with TV up 8.8% this year and direct mail up 6.4%. Publishing will also see increases, with national news up 7.3%, regional news growing 3.9% and magazine brands up 6.8%. Online display, including social media and online video, will accelerate by +13.4% and paid search by +18.4. Combined these are predicted to account for 66.4% of all U.K ad spend. In 2020, eCommerce spend increased by 47.1% alone to $2.9 billion (2.1 billion), making up 27.9% of retail sales for the year the report claimed also. Sectors expected to make the most dramatic recovery for ad spend are toiletries and cosmetics, clothing and accessories and automotive. A look at sector ad spend investment forecasted for 2021 When it came to social media activity last year, TikTok saw a surge of users across Europe, announcing that it had exceeded over 100 million monthly active users last September. It proved to be the most popular app of 2020 according to the Apple Store download charts which it regularly topped each month and growing its advertising business as a result. Elsewhere, government spending on advertising rose by 37.2% due to the increase in public health communications to promote behavior change in battling the spread of Covid-19. The levels across both are expected to “fall back” according to the Warc/AA research this year, however growth is expected from consumer categories such as services increasing by 22%, industry by 19.8% and financial by 20.2% “Agile formats with short lead times were seen to flourish last year, particularly within social media and e-commerce environments, the latter benefitting greatly from stay-at-home orders and well-established logistical networks," said James McDonald, head of data content for Warc in a statement when releasing the research. "Media owners in these spaces are expected to build on good 2020 results this year, though the situation will be more challenging across the remainder of the landscape as ad investment continues to favor performance marketing," he added. The digital demand The digital sector was the one to clearly benefit over the past 12 months. Research released by IAB U.K. and consultancy PriceWaterhouseCoopers (PwC) reported the digital advertising market across the U.K. actually grew by 5% in 2020 to $22.9 billion (16.5 billion pounds), led by spending through video and social media. The firm claimed that display was the fastest-growing digital ad format, up 11%, fueled by video and social spend—both up by 19%. Meanwhile, Search continued to attract the largest share of spend across formats, up 7% year-on-year to account for 51% of all digital ad spend, growth that coincides with the explosion of the ecommerce market. Spend on smartphone ads grew by a further 10%. Included for the first time in the IAB's report was the digital audio market, which it claimed grew by 17% year-on-year to a total of $143.9 million (103.7 million pounds), including podcast spend by 43%. Stephanie Claxton, senior manager, digital and programmatic at PwC, said that new areas of ad spend were "gaining ground" in line with consumer changing habits. “The staggering growth of podcast spend indicates the growing opportunities for brands in the audio space. Just as when we first started measuring mobile advertising back in 2008, it will be fascinating to see how this area evolves.” The pandemic has also accelerated the growth of esports, which according to Newzoo research internationally will generate combined revenues of over $1 billion this year including $641 million (462.5 million pounds) in sponsorship which is 59% of the entire market, $162.6 million (117.3 million pounds) in media rights and $126.6 million (91.3 million pounds) in publisher fees. Sales from tickets and event are not predicted to recover until 2022. Newzoo's forecast for esports sponsorship revenue for 2021 When announcing the Warc Global Ad Trends report for 2021, its author and senior analyst, Rob Clapp, said that while the disruption from Covid-19 had been “rapid and severe,” brands had shown their ability to adapt to meet the needs of consumer behavior, largely benefitting digital media. “The main takeaway for brands has been a greater focus on agility, innovation and effectiveness, a trend that is likely to perpetuate digital media’s rapid growth in 2021 and beyond,” he added. Meanwhile, the Moore Intelligence report has highlighted that agencies have continued to save costs through the government furlough schemes meaning wages were reduced as well as property and travel expenses due to working from home restrictions. This should mean that agencies will grow their margins and could even exceed their achievements from 2019 as a result. There is still clearly a long road ahead internationally to overcome the business impacts of the pandemic, but many parts of the advertising sector expect to see continued growth moving forward. How the sector will ultimately emerge, though, based on these trends in spend, looks unsurprisingly digitally focused. Recent Data Shows Which Companies Increased Ad Spend in the Pandemic