Figures from the latest Advertising Association/WARC Expenditure Report forecast slower growth in 2021 than previously expected, with any gains made in 2021 unlikely to offset this year’s losses, meaning the UK’s ad market is not expected to have fully recovered until 2022.
The report, released today, downgrades July’s 2020 forecast from a return-to-growth of 16.6% in 2021 to just 14.4%. Adspend is set to fall by 14.5% this year to £21.5bn as a result of the COVID-19 outbreak, equating to a loss of £3.6bn compared to 2019.
2020’s final quarter – typically a strong season thanks to the Christmas advertising boom – is set for a 10.5% drop compared to last year. In raw cash, that’s £724m less than 2019.
The biggest losses happened in Q2, when adspend fell by 33.8%: the worst ever quarter recorded, contributing to an overall first half dip of 14.9%, and £2bn lower than the same three months in 2019.
As expected, the formats that suffered worst were those that shut down outright, such as cinema, while others lost out from diminished consumer contact during lockdown. While online formats should be the obvious winners, none are back to the frothy heights of 2019.
“These stark figures demonstrate the strain that all parts of the advertising ecosystem were under during the second quarter. Large parts of our industry and the wider economy were effectively shut down”, said Stephen Woodford, chief executive of the Advertising Association.
“Events of recent weeks have shown this will be no straight-forward recovery as different parts of our country enter or leave local conditions at varying speeds. We must boost growth and support jobs through an advertising tax credit and a skills programme to aid colleagues facing unemployment. It is essential that our workforce, business, and Government work together on the recovery plan for our industry and our country.”
Some detail on 2021's recovery: according to the forecast, cinema adspend is expected to rise by 138.3% as picture houses reopen and films that have been postponed make it to screens.
Other media predicted to perform well year-on-year include out of home (+57.1%), magazine brands (+18.8%) and regional newsbrands (+16.2%), underpinned by strong growth in their online formats. James McDonald, Head of Data Content at WARC noted that “advertising trade remains depressed, and the rising likelihood of sustained localised lockdowns over the winter, a disorderly exit from the European Union in December, and a prolonged economic recovery embodied by rising unemployment, now leads us to believe that the industry will not fully recoup this year’s losses until 2022.”
While the results will surprise few marketers who have lived through 2020’s turbulence, there are lessons. “There's room for cautious optimism,” observes Azlan Raj, Chief Marketing Officer EMEA of the performance agency Merkle, “especially for those agencies using this period of turbulence as a time for reflection and re-evaluation.”
While a more online world (and advertising landscape) could see a pivot to performance, brands still matter, explains Shazia Ginai, CEO of NeuroInsight.
“As we head into the festive season - arguably one of the most emotional times of the year for people - many brands may need to reassess their current courses of action, or risk eroding those positive bonds in which they have invested so much. At a time when customers are seeking reassurance from the world around them, the potential rewards to be reaped could be massive.”
A sample report of the latest AA/WARC Expenditure Report figures for the Q2 2020 period, including 2020 and 2021 forecasts, is available here.
Sourced from WARC/AA