Mobile innovation powers ad spend growth

UK advertising expenditure is forecast to increase by 5.2% in 2016 and 3.3% in 2017 according to the latest Advertising Association (AA) and Warc expenditure report, but it warns the UK Government needs to avoid “any regulatory uncertainty”.

The report shows that UK advertising expenditure saw 5.2% growth in the first half of 2016, despite economic uncertainty in the run-up to the EU referendum. The growth rate was 0.4 percentage points ahead of forecast, with ad spend reaching a record £9.9bn for the first six months of the year.

Full year growth forecasts have also been revised, up one percentage point to 5.2%.

However, the AA/Warc report has downgraded the advertising growth forecast for 2017 by half a point to 3.3%, as the impacts of the EU referendum result begin to be felt.

Despite this, James McDonald, senior data analyst at Warc, told Marketing Week that he remains optimistic about the future and says it is “still not forecasting any kind of advertising recession”.

“We stand by that statement for the time being. While we’ve heard others speak of potential weaknesses in the third and fourth quarter of this year, we work based on data and not anecdotal evidence,” he explained.

“Mobile is seeing high investment, and because it’s such a large part of the UK total it should be enough to carry it through. There is a lot of resilience, innovation and new formats. There’s a lot of growth yet to be realised, so it’s not all doom and gloom.”

Mobile impetus for advertisers

Growth in the first half of the year was driven by digital and mobile in particular, accounting for over half of all display ad spend.

Digital has the brightest outlook. Internet spend forecasts have been revised up 3.4 percentage points to 15.7% in 2016, with mobile advertising predicted to increase 45.6% in the same period.

McDonald said it is predominantly the growing popularity of search that is “lifting the overall advertising market”.

The forecast is for search to become a £5.5bn market next year, making up a quarter of UK ad spend, largely driven by mobile.

“In a time of relative uncertainty due to the EU referendum result, that’s still a big win,” he said. “The fact that mobile now accounts for over half of all online ad spend is a real milestone, and shows impetus for advertisers. It’s where the eyeballs are.”

While the AA and Warc have predicted an increase in advertising spend, the IPA’s Bellwether report downgraded its ad spend forecasts and predicted declines of -0.2% and -1.3% for 2016 and 2017 respectively.