Barbie to the rescue as spend forecasts are revised up

Barbie Movie 2The advertising and marketing industry continues to show huge resilience in the face of economic gloom, with an upgrade in growth forecasts driven by the FIFA Women’s World Cup, the Para Athletics World Championships, and a raft of blockbuster movie releases, including the ubiquitous Barbie.

According to the latest AA/WARC Expenditure Report data, Q1 spend remained stable (0.1% year-on-year growth) to reach a total of £9.0bn.

However, the outlook for the total UK ad market in 2023 suggests that, while growth will be minimal at 2.6% year-on-year, the situation has improved (+2.1pp) since the previous forecast in April, with spend now expected to reach £35.7bn.

These figures also reflect the return to growth of key online formats, with Internet now forecast to account for 76.7% of all spend this year – and 77.6% next year ­– in comparison to 75.1% in 2022.

The muted outlook for this year in part reflects the inflationary pressures faced by all businesses and families, with the projections for 2023 suggesting a -4.3% contraction to the market in real terms.

Even so, sporting events are set to provide a boost to the market in Q3 when, most notably, TV spot and sponsorship, as well as radio and out of home are expected to see adspend growth.

Another channel set to see further post-pandemic recovery is cinema, which is projected to record 20.8% year-on-year growth this year, buoyed by the release of blockbusters such as Barbie, Oppenheimer and Mission Impossible: Dead Reckoning Part One.

The latest dataset suggests the UK’s ad market will grow by a further 4.0% in 2024, to a value of £37.1bn. This represents a slight downgrade (-1.3pp) from AA/WARC’s April forecast but equates to +1.1% growth in real terms.

Advertising Association chief executive Stephen Woodford commented: “This latest forecast indicates a slight improvement in outlook in terms of growth of spend, with the improvements in online forecasts being notable. However, with high inflation continuing to depress consumer and business confidence we may end up seeing a real-terms contraction of nearly 4.3% in 2023 for UK advertising investment.

“The recent higher-than-expected fall in inflation will hopefully continue and with that we will see confidence begin to build later in the year and into 2024, when the ad market is expected to return to growth.

“It is vital to recognise the value that advertising brings to the economy in supporting competition, innovation and growth ahead of the General Election next year. Together with WARC, we will continue to monitor advertising expenditure results and provide guidance for our industry and policy decision-makers within the UK Government.”

The latest figures reflect key online formats returning to growth, including search (+5.1%) and online display (+3.6%) in the first three months of this year. These two formats alone accounted for over two-thirds (76.2%) of all advertising spend during the first quarter.

While “legacy media” had a challenging quarter, streaming platforms, particularly those owned by broadcasters, recorded strong results. Broadcaster video-on-demand (BVOD) spend rose 18.7% during the first quarter and is set to continue posting gains over the forecast period.

Online radio also saw improved growth over the first three months of 2023 with growth of 7.6%, while digital out of home (DOOH) continued to post gains (+6.8%).

WARC director of data, intelligence and forecasting James McDonald said: “With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry.

“That said, a welcome return to growth in key online sectors during the first quarter has been cause for an upgrade to our full year projections, with a forecast rise of 2.6% demonstrative of more favourable trading conditions in the second half of the year.”

Related stories
Bellwether reaction: Is sales promotion killing brands?
Adland hit by surge in direct and promotional marketing
WARC/AA report reaction: Time to tackle the big issues
Adspend hits £34.8bn despite tarnished golden quarter
UK digital ad market battles the demons to top £26bn
Bellwether reaction: Short changed in the long term?
Brands back bullish budget setting as optimism returns
WARC/AA report reaction: Don’t play it safe, be brave
Industry faces headwinds but blue skies are coming
What does it all mean? Sector unpicks Q4 Bellwether