The big recovery

Thankfully, hard times don’t last forever, and it’s promising to see that the latest ad spend forecasts from AA/WARC predict that we are on course for recovery this year. So, grab a cuppa as we take a look at the impact the last year had on advertising and the signs of recovery we’re already seeing.

Annus horribilis

2020 brought difficult times for all, including many of our clients within the travel, leisure and entertainment sectors which have been hit the hardest. The ad market was no stranger to this downturn either, with advertising across pretty much every channel taking a nosedive. With everyone told to stay at home, the obvious channels of ‘out of home’ and ‘cinema’ felt the brunt of this.

Predictions of a 30% downturn in the economy and up to 18% decline in the ad market made for depressing reading at the time, but it turns out it wasn’t quite as bad as first feared. Total ad spend fell by 7.2% in the UK, resulting in a total loss of £1.8bn for the industry, but that was a far cry from what was initially predicted. This is largely down to the government increasing their ad spend by over 37%, becoming the biggest spender of 2020.

Whilst ad spend declined, mainly across offline channels, some channels such as TV and Audio actually saw their audience grow, as we were all stuck at home and desperate for news and entertainment. We also saw an acceleration of digital trends due to the growth of ad spend across VOD, paid search and paid social; unsurprisingly coupled with increases in e-commerce and video consumption. In fact, for the first time, the UK had the largest e-commerce share of retail sales in the world!

Many brands battened down the hatches and prepared for a bumpy ride, but those that were able to continue to advertise not only enjoyed greater share of voice but more cost-effective media, due to media deflation.

Green shoots

Despite ongoing regional restrictions and a second lockdown in November of last year, it was in Q4 that we started to see some green shoots of recovery, with ad spend growing 2.6% (the highest quarterly total on record). Confidence was increasing, largely down to the news of vaccine approvals and the imminent rollout.

Overall, we fared better in 2020 than many other countries when it came to ad spend (which was down globally by -9.1%) and we’re also set to recover quicker than any other major global market this year.

A minor bump in the road

Of course, ad spend faltered again in early 2021 with the announcement of a third lockdown in the UK. However, the continued success of the vaccine rollout, infection levels dropping and progress through the roadmap out of lockdown has given many businesses, and the ad market, a real boost of confidence. We’re seeing that at HOME too, with many of our clients (old and new) putting plans into place for this year.

Predictions of double digit (15.2%) growth in 2021 means the lost ad revenue from 2020 is set to be recouped by the end of this year – plus a further 7.2% growth in 2022. We’re expecting particularly strong bounce back from those media channels that suffered the most, as well as continued growth across digital media. It will however take some channels, such as Direct Mail and Magazine publishers, until 2022 before they fully recoup their losses.

So, what’s next?

The pent-up demand from a nation that has been locked down for more than three months through a very cold winter (and spring), with a projected £200bn worth of savings accumulated and a summer of sport to look forward to, indicates there are opportunities for brands to leverage.

When non-essential shops re-opened and pubs, restaurants and leisure were able to operate outside again on 12th April, there were record numbers of people at Westfields in London (68% higher than after the first lockdown and 35% higher than December), and we saw people queuing for hours to get into shops as well as braving the snow to enjoy a pint in their local beer garden. We’re a resilient nation if nothing else! In addition, the most recent easing on international travel saw searches and bookings surge as soon as the announcement was made.

We know we’re not out of the woods just yet, but with confidence on the rise for markets, consumers and businesses, as well as a successful vaccine roll-out, perhaps, just maybe, we can be hopeful about the future?

Sources:

AA/WARC – Expenditure Report Q4/FY 2020 (April 2021)
AA/WARC – Press Release: Strong rebound from pandemic losses forecast for UK ad market (29.04.21)

Written by:

Suzi Kilka Media Account Director

Category:

What we think

Date:

25/05/2021

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