AA/WARC: Ad spend to recover faster than key international markets in 2021

The latest Advertising Association/WARC Expenditure Report expects the UK's ad market to grow by 15.2% this year, an increase of 0.8 percentage points from the last forecast in October 2020. Due to brighter prospects for online platforms, the estimate for growth in 2020 now stands at -7.9% with ad spend of £23.17bn, an improvement of +6.6 percentage points since the last report. 

The UK’s ad market growth in 2021 is set to make up for 2020’s decline, reaching a total of £26.69bn – exceeding the previous high of £25.37bn recorded in 2019. This puts it ahead of key international markets, with the US expected to grow 3.8%, Germany 9.3%, Europe (excluding UK) 8.8%, and China 10.3%. The decline seen in the UK's ad market during 2020 is estimated to be softer than the global rate (-10.2%) and that of the rest of Europe (-13.7%).
 

Internet ad spend leads to stronger Q3 2020 performance
The latest data includes actual figures for Q3 2020 and predictions for the next two years. Due to better than expected digital growth, UK ad spend fell 3.3% to £5.9bn in Q3 2020, far better than the -17.9% forecast in October 2020. Internet spend rose 10.1% to £4.2bn during the quarter, driven by the rise of ecommerce advertising, which led to a rise of 14.5% in search spend. Overall, UK ad spend was down 11.1% over the first nine months of 2020, at £16.2bn.
 

Fast growth forecast for all media in 2021
Double-digit growth is expected across most media sectors in 2021 – and even triple-figure growth in the case of cinema. Particularly strong results are expected in cinema at 228.4%,reflective of the fact the sector was closed for most of 2020; digital out of home at 53.6%, traditional out of home at 37.7%, and video on demand at 21.2%.
 

James McDonald, Head of Data Content, WARC commented: “The latest market data show that the largest online properties were shielded from the worst of the industry downturn last year. Indeed, with consumption and commerce migrating online during the pandemic, the results show that ad money followed to these platforms’ benefit.

“Paid search – which accounts for over a third of all advertising spend in the UK – was the format that gained most from a surging ecommerce sector. Ancillary research by WARC shows that online sales recorded a six-year leap in penetration in 2020, as e-commerce’s share of all UK retail value rose by 8.4 percentage points to 27.6%. This rate was ahead of China (24.9%) and double that of the US (13.4%) last year.

“The outlook for the year ahead is bullish, reflecting greater certainty around Brexit and the potential for the vaccination programme to unlock economic growth. We now believe that the ad market can overcorrect in these circumstances to top its 2019 peak, though large parts of the industry remain in a fragile state.”
 

Stephen Woodford, Chief Executive, Advertising Association added: “The latest figures from the AA/WARC Expenditure Report come as welcome news at the beginning of the year. Not only does the data show the overall decline expected in 2020 may be less than feared, but the recovery in 2021 will be stronger than we would have dared hope even a few months ago.