Fast-growth digital-first brands are helping to fuel a surge in UK adspend, which is set to grow 6.7% in 2020 as advertisers treat Brexit uncertainy as “the new normal”.
That’s according to Group M’s latest forecast, This Year Next Year, which has upgraded its forecasts.
Growth in 2019 is expected to be 7.8% – the same as in 2018 and an indicator that the UK has been enjoying strong growth for most of the past decade since the 2008-2009 recession.
Brian Wieser, president of global intelligence at Group M, the media buying arm of WPP, said the UK was benefiting from the fact that it is one of the most advanced markets in the world for digital advertising.
“The ad intensity [in terms of growth] in the UK is becoming one of the highest on Earth,” Wieser said, noting that media expenditure has passed that of Germany and is on course to match Japan in five years.
“You wouldn’t want to bet against the UK at this moment – that’s not the same in other countries right now.”
Wieser added that UK advertisers have got used to Brexit uncertainty and adopted an attitude of “I’m not going to make any decision about long-term investment when I don’t know what the economy looks like in six months or a year, so I’m going to spend on advertising.”
Without digital, growth would be weak
By medium, internet advertising growth will slow to 11% in 2020 compared with 14.9% last year. Search will be up 12% and digital display 10%.
Out-of-home is likely to be next best, up 5% in the coming year compared with 7.7% in 2019.
TV is set to improve in relative terms as it is forecast to be flat in 2020 compared with a 2.3% drop.
Radio should be up 2%, better than the 0.2% increase in 2019, and cinema is on course to rise 4.5% – half the 9% boost seen this year.
News brands, down 7.3%, and magazine brands, down 9.2%, continue to struggle, albeit the declines are set to be less severe than in 2019.
Wieser, who joined Group M earlier this year from Pivotal Research, said he was careful to ensure the UK forecast is “balanced”, rather than overly optimistic or pessimistic.
“If you were to strip out digital, the combined growth rate would be pretty weak,” he warned.
Tech giants are among biggest spenders
Group M’s report said the US is the only other large mature advertising market posting similar growth and pointed to several factors, including the rise of eight tech giants – Alphabet, Amazon, Booking.com, eBay, Facebook, IAC, Netflix and Uber – as well as a wave of new, smaller digital disruptors and start-ups that have emerged in the past decade.
These companies are investing heavily in marketing to build their brands. Those eight tech giants spent more than £20bn on advertising globally during 2018, according to stock market filings, and were on course to invest £25bn in 2019.
That £5bn increase is equivalent to “a full percentage point of growth from eight companies alone”, Group M said: “If we add in the next tier of [new breed] digital endemics that may not have existed even a decade ago, it’s not hard to imagine additional percentage points of growth emerging from these types of marketers.”
Wieser admitted that the UK forecast is ahead of the growth rate of the big agency holding companies and suggested that is partly because digital disruptor companies use agencies “with less intensity” during their high-growth phase, but he expects that to change as these brands mature.