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Digital advertising growing by double digits, and the uptick will continue: GroupM’s UK Media Forecasts

Digital advertising will continue to grow by double digits this year and next, according to GroupM’s latest This Year Next Year: UK Media Forecasts report.

It predicts a 14.9% growth for digital pure-play media (i.e., excluding digital revenue associated with traditional media owners) in 2019. The uptick is expected to continue next year with an 11.1% growth forecast.

“Grown much more than any other market globally”

Among the highlights of the report is that the UK has grown much more than any other market globally. It is up by 55% compared to 2013, making it the fourth-largest market worldwide. 

In 2019, UK advertising will grow by 7.8%, to £22B. This will mark its sixth consecutive year of mid-to-high single-digit growth. The trend will continue into 2020, with GroupM forecasting an increase of 6.7% next year, to £24B. This is an increase over its June 2019 prediction of a 4.6% rise in 2020. 

Source: GroupM’s This Year Next Year

“One of the major reasons for this is because, as more digital endemic marketers increasingly replace traditional companies that came before them, spending shares will shift more toward digital marketing,” according to the report.

Much of the recent growth is being driven by digital-first marketers. Companies including Facebook, Amazon, Netflix, Alphabet, eBay, IAC, Uber and Booking.com are expected to spend a combined £25B on advertising globally in 2019. It will account for about 5% of the world’s total spend and an entire percentage point of growth between the eight of them. 

The report notes that such “rapid growth from this group of marketers is unlikely to persist over the long run, as growth rates should ultimately normalize to more closely match economic growth. This would contribute to industry-wide ad spend deceleration. 

On the other hand, economic conditions in the U.K. should improve as we look past 2021—all things being equal—with more stable conditions likely in place. To the extent that longer-term economic forecasts compiled by Refinitiv hold up (with ~+3.0% personal consumption expenditure growth and ~+1.0% industrial production growth), our model would indicate better than +5.0% growth in advertising in subsequent years.

GroupM’s This Year Next Year: UK Media Forecasts, December 2019
Source: GroupM’s This Year Next Year

“Possibilities yet to emerge”

Among other formats, radio is expected to grow +2.0% next year and closer to +1.0% in subsequent years. “Audio streaming services are proving helpful in supporting these outcomes, as is audio’s longer-term audience durability. This makes the medium more appealing to existing advertisers and also helps make it interesting for newer digital-oriented marketers,” the report suggests. 

Print will continue to be challenging and the medium is set to decline on an ongoing basis. National titles are expected to decline by around -7.0% this year and another -6.0% in 2020.

According to the report, “Digital extensions offered by newspaper and magazine publishers help ensure that trends will not be worse, although newspapers and magazines account for less than 10% of media investment on a combined basis in 2019 and beyond, down from more than 50% as recently as 2004.”

The report predicts that digital pure-play media owners will account for 73% of all advertising in the UK by 2024. Additionally, business transformation efforts from traditional brands will orient those companies’ media plans towards digital media.

As traditional offline-oriented brands increasingly invest in digital business strategies—business transformation, for lack of a better term—including direct-to-consumer concepts, sales via third-party e-commerce channels, and focus on driving consumers to digital experiences (including marketers’ websites or branded content), more growth in spending on digital media will occur.

GroupM’s This Year Next Year: UK Media Forecasts, December 2019

Looking ahead, the report suggests that “most large brands will continue to rely on digital media to supplement brand building activities that are often centered around TV or other offline activities, focusing on the use of digital media to drive deeper engagement with consumers who may already have a view on what a brand stands for.

“As of this point in time, most brands generate only a small percentage of their revenues from e-commerce, but there are some brands pushing toward half or more of their revenues or consumer relationship activities from nontraditional environments, demonstrating possibilities yet to emerge.”

The full report can be downloaded from GroupM:
This Year Next Year: UK Media Forecasts

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