June 22, 2017
Key Categories for TV Weaken While Brand Safety Concerns Impact Pure Play Internet, Resulting in Slower but Still Healthy Growth in the UK Advertising Sector
London, 22 June 2017 – UK advertising is set to see an eighth successive year of growth, and the nation will remain one of the fastest-growing media markets in 2017 with a 4.1% increase in spending taking the industry to predicted investment of £18.6 billion. This overall forecast is a downward revision from the 7% growth predicted in November 2016. This is according to the latest media and marketing forecast figures from GroupM, the world’s leading media investment management group.
The fall in ad investment growth predicted is partly attributed to a generalised drop in TV investment by several of the medium’s largest categories. This prompted GroupM to reduce its TV investment forecast from flat to -3% this year. Online advertisers are big and growing supporters of TV but are not enough to offset falling investment from TV’s more traditional categories such as food, finance, cosmetics and retail, many of which face multiple pressures on sales and margins.
Another contributing factor to the more modest overall growth prediction is GroupM’s more conservative outlook on “pure-play internet” growth, from the 15% estimated in November to 11% predicted in the new forecast. GroupM defines pure-play internet as digital advertising minus elements attributable to “legacy” TV and print brands. While the law of larger numbers is part of the slowing of pure play internet, another factor is the brand safety concerns which prompted some large advertisers to pause investment on unmoderated user-generated platforms. Advertisers are increasingly taking a more measured view toward digital as they grapple with developing data strategies; setting more coherent objectives; attribution considerations; increased brand safety and accountability expectations and the appreciating trade-off between risk, price and performance. This growing maturity in larger advertisers’ attitudes to digital marketing is a recurring theme in this new report.
Despite the concerns, pure-play internet is still providing nearly all of the net advertising investment growth in the market. GroupM predicts ad revenue to the other media will contract 4% in 2017, then stabilise in 2018. Stabilisation does, however, depend on traditional media owners better justifying their premium prices to an agency/advertiser audience.
A continuing challenge in TV is the accelerating loss of the 16-24 year-old audience. TV has always been an older-skewing medium, but the loss of younger, ‘lighter’ viewers – or at least their escape from TV’s measurement domain – makes TV’s measured audiences less varied. This nibbles away at the total campaign reach a given volume of audience can achieve. GroupM predicts 2017 will yield 59 billion 16-24 year-old commercial TV impressions in the UK, a 10% drop since the prior year and the lowest volume since the arrival of Sky Digital in 1998.
“We came into the year predicting zero revenue growth for TV, and now we are at -3%, a dramatic change compared to TV’s outstanding performance of 10% growth in 2015. The ‘cost-per-view’ culture engendered by digital video, which prizes price above safety and quality, has fortunately not yet knocked off TV’s crown as the medium with the best-value cost per impression. We think TV’s present pressures are more cyclical, which is typical behaviour in this sector and reflects the economic cycle, rather than structural issues,” said Adam Smith, Futures Director, GroupM.
“We had previously discounted Brexit as a drag on the economy, but the recent UK General Election has magnified rather than reduced uncertainty, in contrast to political and economic stabilisation in the Eurozone. This is not helpful for growth when consumers and public finances are already under stress, and corporate investment subdued,” Smith added.
GroupM’s inaugural forecast for 2018 is for total UK media investment growth of 4.5% to include pure-play digital gaining two points of market share, rising to 58%.
GroupM’s forecasted distribution of advertising investment growth across media formats is detailed below:
|Year Over Year Percentage Change|
|Media yoy % change||2016||2017f||2018f|
|Consumer magazine brands||-4.9||-10.1||-7.7|
|B2B magazine brands||-9.4||-12.4||-13.5|
“Despite the challenging dynamics in economic and political arenas, our advertising forecast demonstrates the fortitude of the UK advertising market,” said Nick Theakstone, CEO GroupM UK. “Sustained investment growth and advertisers’ embrace of automating technologies show the optimism and confidence marketers have for reaching the U.K. consumer digitally. Still, audiences are elusive, especially younger ones and this challenge will only be solved by leveraging data insights throughout campaigns. This is why GroupM continues to invest in data and technology, to future proof our clients’ ability to address and engage their audiences.”
GroupM is the leading global media investment management company serving as the parent to WPP media agencies including Mindshare, MEC, Mediacom, Maxus, Essence and m/SIX, as well as the programmatic digital media platform, Xaxis, each global operations in their own right with leading market positions. GroupM’s primary purpose is to maximize the performance of WPP’s media agencies by operating as leader and collaborator in trading, content creation, sports, digital, finance, and proprietary tool development. GroupM’s focus is to deliver unrivaled marketplace advantage to its clients, stakeholders and people, and is increasingly working closely for the benefit of clients with WPP’s data investment management group, Kantar. Together GroupM and Kantar account for over 50% of WPP’s group revenues of more than $20 billion.
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Note to editors: A copy of GroupM’s U.K. forecast is available by request to contacts below.
Adam Smith, Futures Director
+44 (0)20 7969 4083
Victoria Fairclough, UK