Sir Martin Sorrell’s position as the Mystic Meg of advertising might be under threat after his claims that the sector will suffer this year have been debunked by new figures showing the industry in rude health and set for further growth throughout 2024.
S4 Capital chiefs remarks are in sharp contrast to the latest quarterly data from the Advertising Association and WARC Expenditure Report.
The findings not only show UK advertising spend rose by 15.9% to a total of £9.6bn for the period July to September 2023 but that this year will see a continued increase in spend across more channels, with events such as the UEFA Euro 2024 Football Championships, the Paris Olympics and a likely General Election contributing positively to this trend.
It is the first time that advertising spend in Q3 has exceeded the £9bn mark, driven predominantly by a sharp increase in online advertising.
The UK advertising market is now thought to have grown by 6.4% in 2023, reaching a total of £37bn for the year, which represents a sizeable 3.8 percentage point upgrade from the previous forecast (published in October 2023), with final figures for FY 2023 due to be published in late April 2024.
The projection for advertising spend this year has been upwardly revised to £39bn, equating to a year-on-year increase of 5.9%. All of this is further evidence of increased confidence in advertising and marketing spend, echoing the recently released IPA Bellwether figures which showed UK marketing budgets for 2024 have seen the greatest upwards revisions in more than a decade.
Despite the wider economic market conditions, search (including retail media) and online display (including social media) advertising spend generated higher-than-expected figures in Q3 2023.
Search marked its strongest performance in 18 months, rising by 23.7% and online display followed suit with a 24.8% increase, also achieving its highest gain in the same period. For comparison, online growth in France was approximately 5% during the quarter, while the UK grew 4.6 times faster at 22.3%. Online retailers increased their online ad spend in the UK market by 156% during Q3 2023 as competition for household budgets increased.
Other channels also experienced growth in Q3 2023; cinema was up 21.2% and out-of-home 12.9%, while spend on broadcaster video on-demand (BVOD) increased by 28.4%, reflecting in part the role on-demand viewing played during the Women’s FIFA World Cup.
Looking ahead, TV advertising is set to return to positive figures – up 1.4% year-on-year – mostly driven by increases in BVOD (+14.6%). The latest AA/WARC dataset also expects a return to growth for radio (+2.1%), as well as the online channels of national newsbrands (+2.1%), regional newsbrands (+1.1%) and magazine media (+2.3%).
Advertising Association chief executive Stephen Woodford said: “The Q3 increase in 2023 and 2024 forecast upgrade demonstrate advertisers’ continued commitment to investing in their brands, despite the lack of overall growth and stubborn inflationary pressures in the UK economy.
“The IPA’s latest Bellwether forecast upgrade is further evidence of this, with the strongest improvement in advertiser expectations on total marketing budgets since 2014.
“Our forecasts indicate the advertising industry is performing better than the wider UK economy, with spend expected to reach £39bn in 2024. All this should provide confidence that the industry is well positioned to help the UK’s economy tackle the economic and social challenges it faces, by promoting product and service innovation, stimulating competition and supporting jobs.”
WARC director of data, intelligence and forecasting James McDonald added: “With the UK’s economy in the doldrums, the online ad sector’s strongest performance in over 18 months – growing five times faster than in key European markets – came as a welcome respite for an ad industry worth a record £37bn overall last year.
“Data shows that online retailers more than doubled their online advertising spend during the third quarter, as pricing became competitive and brand salience paramount when attracting stretched household budgets.
“Our expectations for 2024 are now brighter on the tailwind of a strong end to last year and positive sentiment across the marketing and wider business sectors.”
Related stories
Bellwether reaction: The rise of real-world connections
Direct marketing hits 20-year high in upbeat Bellwether
That was then, this is now… for UK marketing budgets
Adspend to reach £35.6bn as industry shows its mettle
AA/WARC report reaction: Yet another cautionary tale
Video is the digital star as H1 adspend reaches £13.8bn
Bellwether reaction: A return to long-term planning
Brands bolster attack and defence as promotions fall
