Barbie to help boost cinema ad spend but headwinds still curbing industry outlook

Despite notable gains for cinema, search and display for 2023, and an upward revision for ad spend growth this year, the Advertising Association and WARC’s report paints a picture of an industry still struggling with economic conditions.  

UK advertising spend is set to grow by more than previously forecast, with the uplift in part driven by a spike in cinema advertising in wake of the success of Barbie and Oppenheimer.

According to the latest growth forecast from Advertising Association (AA) and WARC, UK ad spend will grow by 2.6% in 2023 to £35.7bn, up from the 0.5% growth predicted in April but still short of the 3.8% uplift forecast at the onset of this year.

Cinema spend is expected to be up 20.8% this year, aided in part by several blockbusters hitting screens this quarter, notably Barbie, Oppenheimer and Mission Impossible: Dead Reckoning Part One.

Elsewhere, some online channels are predicted to grow by more than the total ad market, notably search by 6.1% and online display by 5.2%. Digital channels are set to account for 76.7% of all spend this year, and 77.6% in 2024, up from 75.1% in 2022, according to the report.

Despite the slight revision for the full year, first quarter growth was lacklustre with advertising spend almost flat at 0.1% year-on-year.  Despite gains in some channels, such as search (up 5.1%), video-on-demand (up 18.7%) and out of home (up 5.1%), there were notable declines for newsbrands (down 6.4%), TV (-7.2%), magazines (-7.1%) and direct mail (-16.1%).

The outlook for direct mail is somewhat at odds with the latest IPA Bellwether report, which found a net balance of 7.3% of the marketers surveyed reporting an increased investment in direct marketing for the second quarter. The IPA/S&P reports defines direct as email and physical mail, suggesting growth in direct is coming from email and other, digital direct channels.

Advertising spend set to stall this year as impact of inflation drags onDespite the mixed picture, the report from the AA and WARC did point to some reasons to be more optimistic. This summer’s women’s football World Cup and the Para Athletics World Championships are expected to provide a boost to the advertising market, according to AA/WARC, which will benefit TV, and out of home in particular.

Stephen Woodford, CEO at the AA said the forecasts for online are “notable”, helping with the “slight improvement” in forecasted returns.

He adds: “With high inflation continuing to depress consumer and business confidence we may end up seeing a real-terms contraction of nearly 4.3% in 2023 for UK advertising investment. The recent higher-than-expected fall in inflation will hopefully continue and with that we will see confidence begin to build later in the year and into 2024, when the ad market is expected to return to growth.

James McDonald, director of data, intelligence and forecasting at WARC, agreed that although challenging there were some signs of recovery.  “With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry.

“That said, a welcome return to growth in key online sectors during the first quarter has been cause for an upgrade to our full year projections, with a forecast rise of 2.6% demonstrative of more favourable trading conditions in the second half of the year.”

The AA and WARC Expenditure Report forecasts UK ad spend to grow 4% year-on-year in 2024.