By Leah Montebello
A new report has warned that despite adspend getting back on its feet in the first quarter of 2022, this momentum will be relatively short-lived.
UK adspend rose 28.3 per cent to £8.6bn in the first three months of 2022, according to fresh data from the Advertising Association (AA).
The outlook for the total UK advertising market in 2022 has also been upgraded by 0.2 per cent to 10.9 per cent growth, when adspend is set to reach a new high of £35.4bn.
Media analyst at Enders Analysis Douglas McCabe said he was unsurprised by the initial findings for the first quarter of 2022. “It was always going to be great,” he said, especially compared to the lockdowns that haunted the same period in 2021.
AA data found that out of home and search advertising was up 146 per cent and 30 per cent respectively in the first quarter.
However, as inflationary pressures bites advertising budgets, the AA has warned real growth in the UK’s ad market is expected to be just 1.8 per cent this year.
The latest dataset has suggested that the UK’s ad market will experience more stunted growth, rising a further 4.4 per cent in 2023 to £37bn. This represents not only a one per cent downgrade from its April forecast, but it also equates to a 0.9 per cent contraction in real terms.
Director of Data, Intelligence & Forecasting at WARC, an advertising service that helped produce the report, James McDonald warned print media were likely to be worst hit by budget cuts. He told City A.M. that this was particularly unfair “given their effectiveness tends to over-index with an engaged readership”.
He added that advertisers were increasingly seeking to invest in online formats due to the enhanced targeting these ads can offer.
Looking forward into this year, McCabe echoed this point and said companies are increasingly shifting towards ‘direct response advertising’ and away from ‘brand advertising’.
In essence, this means that firms are mainly targeting consumers that they already know are buying the product: a strategy that is about maximising sales and market share, rather than trying to lure in a new customer base with luxe ads.
“Advertising spend is moving closer and closer to transaction, and retreating away from big brand campaigns that are all about profits and emphasising brand coolness ,” McCabe told City A.M.
In the long run, he warned this could spell danger for big corporations that axe budgets in favour of safer campaigns, ultimately meaning that they lose out on hefty returns and new customers.
The flip-side is that the organisations that do take the risk will reap greater benefits, having a greater impact in a less crowded market.
Although brands may be putting a greater focus on direct advertising, McCabe reckons luxury firms, like top fashion houses and jewellers, will still engage in the ad market in a cost of living crunch era.
Indeed, he said that because economic downturn usually facilitated greater household inequality, there is normally a “two-tier advertising market” too.
“Luxury players can continue to advertise in the same way they have always done, whilst other ads will be focused on the lower pots of money being spent. For these companies, the main focus is on value and price points”. McCabe cited recent supermarket adverts as an example of the latter point.
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