Forecasting aids critical thinking, but rarely predicts trend reversals. I repeat JK Galbraith’s dictum, "We forecast not because we know, but because we are asked."
The UK remains the fastest-growing mature advertising market, matching the Asia-Pacific average. It is the world’s fourth-largest advertising economy and third-largest contributor to global ad growth. We forecast 2019 to look similar, with digital climbing to 60% of a total £20bn ad investment.
The economic cycle comprises recovery and recession. Recession is a year, maybe 18 months. Recovery endures more like 10 years. Real UK GDP is in its ninth successive year of growth, and advertising its seventh. We may be certain recession will come, and almost as certain it will be a surprise.
Until then, the picture of UK advertising is the still-startling growth of the Google and especially Facebook companies, and an emerging theme of traditional media restoring their fortunes by digitisation and collaboration.
The worldwide "Facebook surge" of 2016-17 took its market share, by our estimation, from 15% of all digital in 2015 to 27% in 2017. We calculate in 2017 Google and Facebook captured 135% of global digital ad growth. They stimulate demand, mostly from the long tail, by their own dynamism. They take share from rivals. And, of course, they deplete traditional media. In 2017, traditional gave up four points of share here and worldwide.
The IAB splits digital revenue in many functional ways, from in-game to out-stream: admirable, but a little light on actionable truth. We would wiser be if it were split into large and small vendors or the long and short tail or agency and non-agency bought. One can raise the same objection for all media revenue reporting, but digital is unique in its long tail and in being dominated by global vendors. "One size fits all" is not much of a manifesto for the largest single medium and source of nearly all growth.
Another is limit is categorisation (cars, food, finance et cetera). Digital is mostly walled gardens. The UK is doing well having Nielsen categorise 20% of its digital ad investment. Large advertisers would love to know more, but it may be wiser for them to prioritise their users, brands and discovering their own actionable truths rather than worrying about share of voice.
Pure-play internet growth accelerated from 12% in 2016 to 15% in 2017, though much of this arose from the IAB/PwC retrospectively revising 2016 down by £193m. There is, however, no denying the impetus of that Facebook surge among advertisers large and small. It is easy to justify using more digital: lots of data; lots of reach; easy to use; and cheap - but all should be subject to critical thought.
More tech, fewer technicians
The rising tide of data compounds short-termism, specialisation and obedience to suppliers. This will not do. Automation including AI must increase to liberate human brains for thinking. We need more technology but fewer technicians.
According to the Advertising Association, in 2017, digital accounted for 23% of news brands’ advertising revenue. We see this rising to 31% in 2018, assisted by the recent arrival of cross-device, reach-revealing PAMCo, which will amplify the benefits and versatility of its editorial media. This will we think sustain the emerging improvement in news media’s advertising trajectory.
If out-of-home digital buildout is running into diminishing returns, then growth must reside in product improvement, such as playout validation, automation and targeting. 2018 remains the "year of automation" in OOH workflow, with contractors all making good progress. This plus more advertisers seeking safe, extensive reach should improve OOH share.
The digital audio universe has doubled in five years to 22 million and weekly reach is 41%. Traditional radio is sold out and prices are inflating, but the new formats have plenty of room. Digital and streaming revenues, not included in Advertising Association figures, are today between £40m and £50m. Streamers and broadcasters collect about half each. The medium is making progress on deduplicating reach between linear and on-demand, a prize which still eludes advertisers combining TV and VOD.
Barb’s four-screen ratings are on their way, to be complemented in 2019 by commercial impressions, we hope. Four-screen does not however capture smart TVs or boxes with big-screen apps. On-demand viewing is shifting to these from PCs, so this is another urgent job for the tireless Barb. The volume of on-demand audience has at least grown sufficiently to eliminate the supply spikes and shortages common three years ago, and lest we forget, broadcaster TV on all screens still captures 90% of 16-34 ad viewing time, in a safe and salient environment.
Digital drivers and better research contribute to our picture of aggregate advertising investment to traditional media stabilising this year and next – as long as that pesky next recession stays away.