The UK digital ad market maintained double-digit growth of 11% in 2022, despite a challenging year as advertisers fought off the evils of the cost-of-living crisis and political uncertainty, as well as the impact of structural changes such as Apple’s privacy changes.
The IAB’s latest Digital Adspend report, produced with PwC, shows that digital advertising spend stands at £26.1bn – a 56% overall increase since the pandemic began in 2020.
Search continued to maintain market dominance with spend up 13% year-on-year to £13.1bn. Meanwhile, display investment grew by 6% to £10.4bn, with growth in this area fuelled by standard display ads (+ 14%). Video spend grew by 9%, largely driven by investment in outstream formats.
Reflecting the growing diversity within the online ecosystem, Digital Adspend 2022 also includes an official sizing of the UK’s digital retail media market for the first time, with spend standing at £176.4m. This figure relates to UK-based retailers and specifically charts onsite spend.
The forecast analysis indicates that spend in this area will continue to grow in 2023, becoming a key driver of digital’s overall market growth as advertisers increasingly harness retailers’ first-party data.
Meanwhile, the rate of growth in desktop spend (+14%) outstripped mobile (+8%) for the first time since records began, a move that coincides with Apple’s privacy overhaul which saw the tech giant remove its Identifier for Advertisers (IDFA) cookie and shows how structural changes are shaping the market. However, mobile still has the largest share of the market at 58%.
Elsewhere, podcast spend grew by 32% to £76.3m, which is more than a threefold increase since IAB UK first started measuring the market in 2020. Another area of strong growth was in a category that includes wearable devices and in-car advertising, indicating how advertiser spend is embracing the opportunities posed by new technology.
IAB UK chief executive Jon Mew said: “The results highlight two things: resilience and opportunity. Not only was 2022 challenging for our industry, as it was for the entire UK economy, it also followed a year of stratospheric, pandemic-induced growth in 2021. In this context, it’s testament to the resilience of digital advertising that the market has maintained double digit growth in 2022 – and astounding that it has grown by 56% since the pandemic began.
“Today’s results also reflect the growing opportunities for advertisers to resonate with audiences in new ways. Of course, search and display spend still underpin the digital ecosystem, but the UK’s flourishing retail media market – officially sized for the first time in this report – alongside the continued growth of podcasting, show how digital is diversifying to offer advertisers more choice and more immersive routes to connect with consumers.”
Tesco Media and Insight Platform strategy director Simon Lonsdale added: “It’s hugely significant that digital retail media is in the IAB’s 2022 Digital Adspend report for the first time. While various forecasts and estimates have been published over the past few months, this is the first official cross-market spend figure for the UK-based market, which reflects the growing importance of retail media to advertisers.
“Our priority is to evolve and grow our retail media business to allow advertisers to reach the customers that matter most to them at scale. We look forward to working closely with the IAB to pioneer the frameworks that are essential to underpin long-term growth and allow retail media to reach its full potential.”
However, Nano Interactive chief revenue officer Niall Moody said that while it is encouraging to see digital ad spend rise in spite of the cost-of-living crisis, acquisition costs are being hit by rising inflation and challenges using personal data to target people online.
He added: “This trend shows no signs of slowing with growing consumer data privacy concerns, continued changes in data usage from tech giants and government regulations.
“As a result, huge swathes of people are now ‘unaddressable’ via cookies, profiling and other people-based methods. This is reducing the scale and effectiveness of online advertising just as marketers are coming under even more pressure to deliver results.
“In 2023, you no longer need to know who someone is to deliver effective advertising online. Brands and advertisers who embrace new targeting models free of personal identifiers will be well placed to navigate this increasing signal decline and futureproof their campaigns.”
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