Digital ad spend to decline for the first time as Covid-19 ends a decade of growth

After a record 2019 and equally promising start to 2020, UK ad spend will decline across all categories this year – the first time this has happened since the advent of digital and bringing to an end a decade of growth.

Total advertising expenditure rose 6.9% in 2019 to a record £25.36bn. However, the Advertising Association (AA) and Warc have significantly downgraded their projections for 2020 as the impact of Covid-19 is felt on the UK advertising industry and economy.

As such, total UK ad spend is expected to decline 16.7% year on year in 2020 to £21.13bn, down from the pre-Covid-19 forecast of 5.2% growth to more than £26bn.

Ad spend is expected to return to growth in 2021 with a rise of 13.6%, but absolute levels of investment are not expected to surpass the 2019 total.

Online and digital formats performed strongly during the past year and they are forecast to decline by less than traditional formats over 2020. Search and online display grew by 17.8% and 17.4% respectively in 2019 but are predicted to fall by 12.1% and 12.7% respectively this year.

My message to brands is: where you can, keep connecting with your customers and supporting your brand.

Stephen Woodford, Advertising Association

Video on demand (VoD) recorded growth of 15.5% in 2019 but, overall, TV saw a decline of 3.5%. Both are expected to be affected by the downturn this year, with TV forecast to see a 19.8% dip in advertiser investment and VoD a 6.3% fall. Both are expected to rebound in 2021, with TV expected to grow 15% and VoD experiencing an increase of 21.9%.

The ongoing decline in publisher revenue that was recorded in 2019 is expected to intensify this year, with decreases of 20.5% for national newsbrands, 24.1% for regional newsbrands, and 25.1% for magazine brands. All are then expected to record growth in 2021.

Given the restrictions on population movement and gathering ordered by the government, formats including out-of-home and cinema are expected to see large falls in ad spend in 2020, with growth projections at -18.7% and -33.6% respectively. However, both are forecast to record some of the largest gains in 2021, with digital out-of-home (DOOH) experiencing a rise of 21.4% and cinema witnessing the highest increase of all formats at 39.9%.

With the numbers signalling there may be a soft recovery from Q4 2020 onwards, the AA says smart marketers will be planning ahead of the curve and continuing to invest in the capabilities that will help the industry get back to 2019 levels of growth.

“They’ll think about what’s a smart strategy as our business restarts and we reconnect with our customers,” the AA’s CEO Stephen Woodford tells Marketing Week.

“This is going to be an extraordinary period of very fast adaptation and agile marketing, and how people deploy their money and reconfigure their spend. My message to brands is: where you can, keep connecting with your customers and supporting your brand. We’re certainly buying lots of food and drink, consuming lots of downloadable content, we’re dreaming of holidays. It’s about planning for that resumption of business.”

The Advertising Association is also in the very early stages of proposing a tax credit scheme for advertising and marketing services. The aim is to stimulate investment and encourage advertisers to continue, or return to, advertising.

Such a plan would also encourage companies that do not currently advertise, typically small and medium-sized business, to invest in advertising. The AA believes it would also act as a stimulus for the wider economy and provide a welcome boost in investment for British commercial media.

In 2019, consumer spending accounted for two-thirds of UK GDP and so encouraging consumer confidence through advertising would be boost to the national recovery, the AA says.

“There’s a strong economic case given 65% to 70% of UK GDP depends on consumer spending,” Woodford says. “Advertising is obviously a key part of driving and encouraging consumer spending. At a time where people might be cautious, a tax credit could be very helpful with that.

“This is about helping firms reach their customers more cost-effectively and spend more money, drive more business and get the economy moving.”