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AA/WARC reports 9th consecutive quarter of growth, signaling resilient recovery

AA/WARC yesterday reported that UK advertising spend increased by 4.3% between July and September 2022, following on from last week’s IPA Bellwether results that showed a positive outlook for UK marketing budgets despite the recession and rising inflation. This is the ninth consecutive quarter of growth – signaling resilient recovery from the COVID-19 pandemic – yet headwinds remain.

According to the Advertising Association, the UK’s ad market is expected to grow by a further 3.8% this year following an estimated 8.8% increase in 2022, bringing the total to £36.1 billion based on the latest advertising revenue data collected from media owners. However, it is predicted that almost all advertising sectors will witness reduced growth in line with pressures from the economy in 2023.  

Q3 2022 Results

Growth was up by 10.8% in the first nine months of 2022 with total expenditure at £25.3 billion. However, accounting for inflation, real growth in 2022 is thought to have been flat at -0.1%.

Continuing their strong recovery in Q3 were Out of Home (OOH) and Cinema while Search rose by 7.7% (equivalent to almost 40% of total adspend). Social media, including online display, increased to 4.4% while broadcast video-on-demand rose 4.3%. 

For the final quarter of 2022, further recovery is anticipated due to the World Cup and Christmas; ad spend during this period is estimated to have grown to $9.5 billion (representing 4.0% growth).

Commenting on the results, Ben Alwin, Head of Paid Media at SINE Digital said, “It’s great to see adspend continue to rise, but, as brands navigate a turbulent landscape, it’s not surprising that budgets are moving further away from traditional advertising and being funneled into digital channels. At SINE Digital, we strongly believe this is the right decision – because being able to properly measure the effectiveness of campaigns couldn’t be more important, especially as marketers tighten budgets and strike to make stronger connections with both existing and new audiences.”

The onus is now on marketers to truly understand how important it is to use data-driven, digital-first campaigns so that they truly make it count during the toughest of economic times.”

Ben Alwin, Head of Paid Media, SINE Digital

Video on demand (VOD) continues to soar

Oscar Wall, General Manager, EMEA at Recurly said, “VOD adspend was up 4.3% in Q3 compared to the previous year and 10.5% above the 2022 forecast. Streaming services that offer ad-tiered plans need to be mindful of the fact that while ad spend is up, the price points they offer need to be realistic for brands to buy the ad space and see value on their investment. This needs to be done while also making the streaming platforms accessible to cost-conscious consumers during the cost of living crisis. 

The AA/WARC report suggests that there will be growth in all sectors however, when inflation is accounted for, we see a real-terms decline of 3%. Subscription services need to retain subscribers during this time, otherwise brands are less likely to invest in advertising on their platforms. It’s important to offer exclusive content, use bundling techniques and offer a variety of price plans relevant to usage so the consumer sees value in keeping the service.

Carina Moran, Head of Agency Strategy Development, Yahoo UK, commented, “The effects of inflation and budget cuts are not limited to just our personal finances but are also being felt across the online advertising industry. In times of financial scrutiny, it is more important than ever that adspend is delivering results and that corners are not being cut in an effort to deliver fast returns. Flexibility is pivotal as brands rethink their approach to efficiently engaging an ever-changing consumer.”

Overall, it’s important for brands to be adaptable and creative in their approach to online advertising, both channel and format, in order to maintain growth in this challenging economic climate.

Carina Moran, Head of Agency Strategy Development, Yahoo UK

Implications for Search

Speaking on Search results specifically, Gustav Westman, CEO and Founder of BrightBid says, “The UK ad market is showing continuous growth despite economic challenges, but brands must be strategic to avoid wasting resources on ineffective campaigns.”

The AA-WARC report shows that Search marketing has risen by 7.7% and accounted for nearly 40% of ad spend in Q3 2022. With increased competition and rising CPC inflation in the second-largest market for Google Search, brands need to use solutions that offer accurate data analysis, audience targeting, and keyword optimization to help combat inflation. 

Competition in Search is heating up, Google is having to contend with Microsoft’s investment in Open AI and ChatGPT’s predicted use for their search engine Bing. The complexity of the search environment now demands AI technologies designed to optimize marketing campaigns that cater to the customers’ goals and not just the platform.

The most effective solution for brands is to integrate AI processes that boost their marketing campaigns and deliver desired results through effective collaboration with marketing teams and repurposing human talent on creative and insightful tasks.