UK's advertisement expenditure surpasses predictions; however, specialists foresee a lethargic phase ahead
Hey there! Let's dive into the latest scoop on the UK ad market, shall we? Last year (2024), it raked in a colossal £42.6 billion in ad spend, marking a 10.4% increase year-on-year, as per the Advertising Association/WARC Expenditure Report. But, as they say, appearances can be deceiving, and the market's foundations seem to be cracking slightly.
In 2023, we had a 6% growth in ad spend, but after adjusting for inflation, the market actually shrunk by 1.2%. Conversely, 2024's impressive 10.4% rise translated into a real-terms increase of a robust 7.6%, outpacing the earlier forecast of the Advertising Association/WARC.
As we step into this year, the market is projected to grow by another 6.3%, reaching £45.2 billion, with £47.8 billion in sight for 2026. However, confidence has softened a bit since the initial forecast back in January. Economic headwinds, political uncertainty, and looming US trade tariffs are casting long shadows.
Digital media continues to reign supreme, with every fifth ad pound now spent online. Search expenditure soared 12.8% to an impressive £16.9 billion in 2024, while online display, including social media and video, jumped a staggering 15.1%, amounting to £16.7 billion.
Retail media took the spotlight as the breakout star, skyrocketing by an impressive 22.7%. However, there are signs suggesting that 2024 might be more of a high point rather than the beginning of sustained momentum. A recent Adweek article revealed that brands are experiencing flat or declining returns from retail media, despite Walmart pushing for significant spend increases of up to 25%.
One global brand has already walked away from their annual deal, citing underperformance and inflexible terms. Moreover, Google's U-turn on third-party cookie deprecation has undermined retail media's unique selling point – exclusive access to first-party data in a cookie-less world. With traditional tracking set to continue, retail media's exclusive edge is starting to fade.
The long-term trajectory of retail media is now less certain – but other parts of the market are showing signs of evolution. According to the Advertising Association/WARC Expenditure Report, even TV, once considered digital's casualty, is adapting. By redefining TV to include ad-funded VOD like Netflix, Disney+, Prime Video, and FAST services, TV ad spend grew by 3.8% to £5.3 billion. Video-on-demand alone surged by an impressive 25.7%.
Lindsey Clay, the CEO of Thinkbox, noted the return to growth for TV advertising in the UK, stating, "It's great to see this return to growth for TV advertising in the UK – growth that reflects its expansion and the proof of TV's effectiveness." However, Clay also cautioned about the continuous rise of social media ad spend:
"While we celebrate some growth in quality advertising investment, we should also reflect on how social media advertising continues to grow despite huge question marks over its return for investors, and growing proof of its destructive impact on society in general and young people in particular."
By 2026, search, retail media, social, and other digital formats are expected to account for over 80% of the entire UK ad market, symbolizing the unstoppable dominance of online advertising.
The festive season of 2024 provided the industry with an additional boost, as Christmas spend increased by 9.1% compared to the previous year. Search (+12.5%), online display (+15.4%), TV VOD (+23.2%), and cinema (+24.2%) all benefited from a late-year surge.
Cinema's strong finish was propelled by a blockbuster lineup, including Wicked, Gladiator II, and Paddington in Peru. Despite the optimistic outlook, industry leaders are sounding cautious notes. Broadcasting concerns such as geopolitical headwinds and regulatory uncertainty could potentially rattle advertiser confidence. James McDonald, WARC's forecasting lead, warned that new US tariffs could hit UK businesses with international supply chains hard, potentially eroding margins and fanning inflation, a situation where advertising budgets might get squeezed.
"The temptation to cut ad budgets in such a climate will be elevated," McDonald said. "WARC research clearly demonstrates that short-termism poses an inordinate risk to enduring brand equity."
The UK ad market may appear robust on the surface, but the signals from within the industry are more layered. With inflation lingering, consumer confidence wavering, and global tensions escalating, advertisers are being urged to resist short-term cuts and focus on long-term brand strength instead.
Photo by Patrick Frossard on Unsplash.
Enrichment Data:The UK digital advertising market is undergoing significant growth and change, driven by shifts in consumer behavior and technological advancements. Key trends and challenges in search, retail media, and social media, and their impact on brand equity are as follows:
Trends in the UK Digital Advertising Market
- Digital Advertising Growth: The UK digital advertising sector has experienced robust growth, with spending reaching £36 billion in 2024, signifying the sector's resilience in the face of economic challenges[1][4]. This growth is fueled by the increasing dominance of digital channels.
- Search Advertising: Search revenue is likely to grow by 7.3% globally in 2025, indicating ongoing interest in search marketing as a valuable consumer targeting tool[3]. In the UK, this trend is expected to persist, as search continues to be an essential strategy for brands to maintain visibility and drive conversions.
- Retail Media: Retail media is one of the fastest-growing segments globally, with projections pointing to a value of $169.6 billion by 2025, reflecting brands' efforts to leverage consumer data and in-store experiences[3]. In the UK, this trend suggests that brands are focusing on targeted advertising within retail environments to boost brand equity through more personalized and relevant advertising.
- Social Media: Social media continues to be integral to digital advertising, as user-generated content becomes increasingly relevant. Brands are capitalizing on platforms like TikTok and Instagram to engage younger audiences[3].
Challenges in the UK Digital Advertising Market
- Economic Uncertainty: Economic challenges, such as global geopolitical tensions and inflationary pressures, pose significant risks to the advertising industry, potentially leading to reduced budgets[4].
- Regulatory Frameworks: Evolving regulatory landscapes, like data privacy laws, are compelling advertisers to adapt their strategies to ensure compliance while still maintaining effective engagement with consumers[5].
- Measurement and Efficiency: With moderate growth forecast for 2025, advertisers are concentrating on improving measurement and efficiency in their campaigns to maximize ROI[5].
Impact on Brand Equity
- Enhanced Personalization: The growth in retail media and social media allows brands to personalize their advertising, thereby fostering deeper connections with consumers and enhancing brand equity.
- Increased Visibility: Search advertising helps brands maintain visibility in the competitive digital landscape, ensuring they remain relevant and competitive.
- Adaptation to Regulatory Changes: Brands that adapt effectively to regulatory changes can bolster their reputation and brand equity by demonstrating compliance and ethical responsibility.
Overall, the UK digital advertising market is characterized by strong growth, driven by consumer behavior shifts and technological advancements. However, challenges such as economic uncertainty and regulatory changes necessitate brands to be agile and strategic in their advertising approaches to maintain and enhance brand equity.
- The UK's blossoming digital advertising market, primarily driven by trends in search, retail media, and social media, is expected to account for over 80% of the entire market by 2026, showcasing the unwavering dominance of online advertising.
- In the face of economic uncertainties and regulatory changes, digital advertisers are urged to prioritize long-term brand strength instead of resorting to short-term budget cuts, focusing on enhancing brand equity through personalized advertising and increased visibility.
- Economic headwinds, political uncertainty, and looming US trade tariffs cast long shadows over the UK ad market, prompting Geoffrey Smith, The Business Editor of Insider, to suggest that the market's foundations seem to be cracking slightly, despite an impressive 10.4% increase in ad spend in 2024.
