Why is the Expenditure Report such an important data set for forecasting UK adspend landscape?
The AA/Warc Expenditure Report is the definitive measure of advertising activity in the UK. As the only impartial source of quarterly adspend figures and forecasts, it is the most reliable picture of the industry by advertisers, agencies and media owners.
About the Advertising Association / WARC data
The Advertising Association and WARC engage representatives from all media sectors in quarterly surveys to gather the data which fuels the Expenditure Report. The revenue figures collected are before the deduction of agency commission, but after the deduction of all negotiated discounts. With the exception of direct mail, production costs are excluded. The methods of collection for each sector are given on WARC.
Our approach to adspend forecasting
Analysis of data over the past 30 years shows a clear relationship between the annual changes in total UK adspend (excluding recruitment) after adjusting for inflation and the annual changes in GDP. In fact, the changes in GDP account for around three quarters of the changes in adspend if the dotcom crash year of 2001 is excluded. At the quarterly level, the relationship is less clear as there are a number of short term factors that have a bearing on quarterly adspend levels. These include global sporting events such as the Olympic Games and World Cup and other influencers such as the timing of Easter. As a result, our adspend forecasts are based on annual GDP forecasts and for the latter we tend to use the consensus forecast published by the Treasury. This consensus is produced monthly and is based on around 40 independent forecasts from both city and non-city organisations. Other more subjective factors are also taken into consideration in our adspend forecast. For example, after the severe recent recession, some advertisers might well be cautious when considering increases in marketing budgets and wait until the recovery is clearly under way. This would result in a lower rate of adspend growth than would be otherwise expected in the shorter term followed by a higher rate in the longer term.
The forecast annual adspend total is broken down into quarterly figures after considering short term factors such as those identified above. The quarterly totals are then split into the display and classified sectors by examining the long-term share trends for each. Each element is then split by media type, for example television within the overall display sector, again by analysing the trend in the medium’s share of the sector. In all cases, a number of short-term factors will also be taken into consideration.
For recruitment advertising, which accounts for less than 3% of all adspend, we have a separate model which links changes in adspend to changes in the level of unemployment. A number of structural factors are also considered here such as the trend in favour of online ad expenditure in place of print.
Annual headlines: 2017 sees biggest UK adspend on record at £22.2bn
UK advertising expenditure recorded its eighth consecutive year of market growth in 2017 which,
with expected increases in 2018/19, puts the industry on course for a decade of continuous expansion
UK advertising expenditure grew 4.6% to reach £22.2bn in 2017, the eighth consecutive year of market growth.
The final three months of 2017 saw expenditure grow 6.2% in Q4 2017 over Q4 2016, with adspend breaching the £6bn barrier for the first time ever in a single quarter to reach £6.1bn
2018 has also been upgraded by 1.4 percentage points to 4.2% growth, and a further rise of 3.8% is expected for 2019.
If proved correct, this will complete a decade of continuous expansion for the UK advertising industry.
Expenditure Report Q2 2017: UK advertising delivers strongest H1 on record
Our latest expenditure report results see a record H1 for UK advertising. The all-time high investment, since monitoring began in 1982, highlighted in Advertising Association / WARC Expenditure Report data has been driven by increased spend on digital advertising.
Expenditure Report Q1 2017: The headlines
UK advertising trends have become increasingly complex over recent months. Understanding what’s driving growth over the short, medium and long-term is a challenge, but one that’s essential if brands and agencies are to optimise their investment and media owners are to respond to market demand.