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

    AA/Warc report predicts a mere 3.9% media owner ad revenue growth next year.

    The UK’s advertising market is set to grow by 9.2% in 2022 to a total of £34.9bn, which is 1.7% less growth than projected for the year as of July 2022. But there’s even a significant slowdown predicted for 2023. What’s gone wrong?

    Every six months, a report from AA/Warc collects ad revenue data directly from media owners across numerous channels. Pressures from inflation, squeezed margins and the cost of living crisis have increased the price of advertising these last few months, so the fact that ad spend is up does not mean that marketers are buying more ads. With that caveated…

    There’s a mere 3.9% media owner ad revenue growth expected for 2023 across the whole UK industry, a total of £36.2bn. This is a 0.5% downgrade on previous predictions. Meanwhile, online advertising’s set to take a larger share of overall spending. At 74.0% for 2022, it will cross the three-quarters threshold to 75.2% in 2023. 

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    Sector by sector

    The fastest ad spend recoveries were naturally attributed to the hardest-hit sectors of out-of-home (OOH) and cinema, with the former at 46.4% and the latter at 2,208.2% (cinemas shut during the pandemic, remember).

    TV was alone in seeing a decrease in ad revenue in the last quarter (-0.6%). It’s worth noting that spending in TV is diversifying across new channels (that broadcasters often still own) such as broadcast video-on-demand (BVOD) (+9.3%). In the final quarter, video-on-demand is set to rise ahead of the wider market with expected growth of 4.2% too.

    Per IAB figures, online classified advertising was up by almost a third and national newsbrands were up 9.1%, with magazine brands at 3.3% and regional newsbrands at 0.6%.

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    Forecast

    Despite the economic weaknesses, there’s a bumper Q4 anticipated. In an unprecedented move, the World Cup has been moved from the summer to the winter. This huge event sees tens of millions of TV spend crammed into an already congested festive window. Due to this, advertisers are expecting a lucrative period, but less lucrative than if both demand windows were separate.

    There’s some good news. Ad spend for 2022 Q4 is set to increase by 4.5% from last year’s record high to a total of £9.5bn. 

    Stephen Woodford, chief executive of the AA, issued some strong advice for the sector ahead: “Looking forwards, political and economic stability is much needed, given the inflationary and recessionary forces impacting all businesses. As companies navigate these pressures, we see them continuing to prioritize advertising investment to protect their brands in exceptionally challenging market conditions.” 

    Meanwhile, James McDonald, director of data, intelligence and forecasting at Warc, warned that higher costs will cut household budgets and ad spend budgets alike. “Trading conditions are at their worst since the Covid outbreak, leading to muted expectations for the Christmas quarter.”

    Despite the muted expectations, McDonald outlined that the growth predicted would still be “impressive” and “near double the average rate of expansion recorded prior to the pandemic.”

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    It appears, even with the growth slowdown, businesses have not forgotten that advertising is a vital investment. Of course, with retailers like Made.com running out of cash, for many advertising simply will not be an option.

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

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