As a UK-based research company, Enders Analysis has a front-row seat to observe a pioneering market for online advertising and advertising technology. The Advertising Association’s latest Advertising Pays report, which we co-authored with Credos, demonstrates just how much there is to celebrate in the British ecosystem.
The UK is the third-largest online advertising market after the US and China and bigger than the next two European markets combined. At 0.63% of GDP, UK online advertising spend relative to the size of the economy is higher than anywhere in the world. This country is home to more than 300 UK-founded adtech companies, which together employ 19,000 people.
They thrive in the largest advertising innovation cluster in Europe, which has raised more than $1bn in growth funding since 2013, not to mention inward investment by more than 100 UK subsidiaries of adtech companies based abroad. From advertisers and agencies to technology providers and online media owners, the innovation, skills and vitality of the sector should be celebrated as world-leading cornerstones of Britain’s creative economy.
Across the technology, media and telecoms sectors we cover, online advertising has become a key part of what companies do – bringing in customers, generating revenue or both. In just a few years, the online toolkit for advertisers has gone from niche to mainstream, from clunky to sophisticated, from experimental to essential.
With its unique data-based capabilities, online advertising attracts budgets that were previously not spent on advertising and businesses that did not previously advertise. There are now 800,000 more small businesses in the UK than just 15 years ago. In 2017, 42% of small and medium-sized businesses said they were advertising, up from 30% in 2013 – a shift that would not have been possible without self-serve online advertising tools.
Because of these green shoots, the industry’s growth has been far from a zero-sum game. Since the 2008-2009 recession, annual online advertising spend in the UK has grown by £10bn, with only 20% of this growth explained by the decline of other advertising media.
But only a fraction of UK online adspend reaches British content media: in 2018, news brands received 4% of the total and broadcasters only 3%. The adtech industry has developed impressive technology for identifying the right audiences wherever they may be, but the consequence has been that the value of quality media contexts and deep audience attention is not fully priced in online.
As observers of digital ecosystems, we are concerned that five out of the six largest online advertising platforms and media owners do not disclose the revenue they received from advertising targeted at UK audiences – a glaring omission as the industry strives to become more transparent.
As consumers, we would welcome more information and control over how our data is collected and processed by the services we use and better protections for children and other vulnerable groups. Research by Credos shows that trust in advertising has reached a record low in the UK. Accounting for more than half of adspend in the market, online advertising has a particular responsibility to address these concerns.
We therefore welcome the recent step-change in initiatives to better self-regulate the sector, whether by industry bodies or the companies themselves. In terms of rules and governance, it is still far from a level playing field between online and offline advertising or even between different types of online.
Delivering a UK online advertising ecosystem that fairly balances the needs of consumers, companies of all sizes, media owners and society in general will require self-regulation to be supported by informed legal and regulatory interventions. With this in mind, it is more important than ever that policymakers understand the scale, depth and diversity of online advertising with the same enthusiasm with which British companies have embraced it.
Claire Enders is founder of Enders Analysis