The coronavirus pandemic has had a massive impact on advertising, with UK ad spend declining by a record of £1.8billion in 2020. However, entering 2021, as the vaccination programme got going, the world opened back up, and people returned to offices and resumed normal activities; the advertising industry rapidly came back to life. The latest Advertising Association/WARC Expenditure report published in January 2022 revealed a stronger recovery for UK advertising than previously anticipated, with a growth of 26.4% in 2021, reaching a total spend of £29.7 billion. This was the strongest year in UK advertising history, cementing the UK’s impressive position as the biggest digital advertising market in Europe.
The Best Summer
Last summer saw the welcome return of key sporting events such as the Euro’s, the Olympics, and Paralympics, and with them the return of big-budget advertising campaigns. Cinemas saw triple-digit growth to the tune of a whopping 655.9%, driven by the long-awaited release of James Bond’s No Time to Die and other blockbusters. Of course, the closure of cinemas for much of the last two years gives that figure an extra boost. Out of home advertising also recovered and was up by 62.6% as people happily flocked to the streets, shops, pubs, and restaurants en masse.
Digital Bounce Back
The United Kingdom is the , behind the United States, China, and Japan, but in digital advertising, the UK takes third place on a global basis outperforming Japan’s spending by over a third. The has consistently grown between 14% - 15% year on year, and even though this was interrupted by Covid, the market romped back to its perennial 15 % growth in 2021. One indicator of this was the continued evolution of regional news brands, which saw online ad revenue overtaking print for the second quarter running, as online revenue grew by an impressive 55.7%.
The emergence of the new Omicron variant of Covid in November 2021 led to new measures being introduced to control its spread, which also impacted activity and interaction, slowing the economy. The latest shopping and socialising trends suggested that whilst people were going out more during the Christmas period in 2021 compared with 2020, consumers were still concerned about the pandemic, which impacted spending patterns and advertising consumption.
Mergers & Acquisitions
Mergers and acquisitions within the sector have also taken off. Internationally, The New York Times acquired sports title The Athletic for $550m, while German publisher Axel Springer snapped up US outlet Politico for $1 billion. In the UK, we saw our second largest publishing house Newsquest acquire Archant, its fourth-largest competitor, bringing over a hundred magazine and news brands into Newsquest’s portfolio. Investment in digital is the theme driving this activity, with those struggling to manage the decline of print, snapping up their more digitally savvy peers.
Conversely, some companies have acquired previously print centred titles to then integrate them into their own digital strategy. One clear winner has been magazine publisher Future, with its digital strategy eclipsing its physical publications by pivoting print titles towards online digital content, funded by advertising and e-commerce revenues. During the pandemic, it has completed several acquisitions, including publishers Dennis for £300m and TI Media for £140m, adding more than 50 titles to its stable. As a result, its share price more than doubled during 2021 as its pre-tax profits doubled.
Since the Russian invasion of Ukraine, an information war has raged, the digital realm a new battlefield. Indeed, it could be argued that hostile action started prior to the invasion by Russia with propaganda reaching millions of people through Facebook, Google, YouTube, TikTok and Twitter – both justifying the subsequent action domestically in Russia and across the globe.
While putting warning labels on content from state-affiliated media, Twitter has not done the same with government-controlled accounts such as the Twitter accounts of Russia’s embassies. As such, it becomes ever more important to check and test the veracity of the source - one widely circulated narrative claimed the rationale behind the invasion was to prevent an imminent nuclear attack on Russia by Ukraine, for example.
For years, Google has been one of the most popular vehicles for disinformation on the web, especially through its YouTube video platform. In 2013, RT (previously Russia Today) became the first news channel on YouTube to achieve one billion views.
However, the digital platforms also facilitate notable advertising revenues; Google runs the largest programmatic advertising service on the internet, which delivers ads to news websites regardless of where or what they are. For example, Google delivered advertisements from top brands to Sputnik News, the general-interest site that the Putin government launched in 2014.
It feels as though the regulation around digital advertising is still struggling to catch up with the technology and its practical uses. This area is liable to see significant developments in the years to come.
Preliminary spending plans at the start of 2022 were positive, and marketing budgets were seeing considerable growth as businesses stepped up their Covid recovery efforts. Main media advertising, which includes the big spend TV and radio campaigns, was expected to see increased spending alongside the entire range of marketing activities. Sectors particularly hit by the pandemic, such as cinema and out of home entertainment, are set to bounce back again, with continued growth expected from the largest advertising channels such as online display.
Overall, UK ad spending was forecast to rise to £32.2 billion with an impressive 8.5% growth rate. Still, the invasion of Ukraine put all of this in doubt overnight.
The war in Ukraine has sparked wider geopolitical tensions, amplifying the existing risks of higher input prices and supply chain disruption. The higher cost of living may also slow advertising momentum, and the weaker outlook for media and marketing spend has seen advertising giants such as and be downgraded by rating agencies.
Brexit, Covid, and now a European war in close succession are all colluding to create the most uncertain outlook for many years. In recent days, the UK has had its official 2022 growth forecast reduced to 3.9%, with a consensus that the EU will see something in the range of 2.5% - 2.8% and the US 3%. All strong numbers in historical terms, but against unprecedentedly weak comparisons.
The advertising industry, much like the consumers, is resilient, so despite this backdrop, it would not be surprising to see the sector deliver a positive performance overall.
Written by Chris Ardern, Risk Underwriting Manager
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