The Advertising Industry Recovery; Media Nations 2021
Everyone has been waiting with bated breath to see how the ad industry is predicted to recover after the effects of the pandemic, and how it has been recovering so far.
Here’s the breakdown from Ofcom’s Media Nations report 2021.
Revenue overview:
In 2020, the UK advertising sector contracted for the first time since 2012.
Commercial TV sector revenues were impacted significantly by the sharp and fast downturn in television advertising revenue, as many advertisers cancelled or postponed their campaigns due to the pandemic. Total UK advertising revenues declined in real terms by 8% in 2020, to just over 2.3bn. Here are the stats:
· Cinema had the largest decline, down 82% YOY.
· Newspaper and magazine print declined by 38% and 32%.
· TV advertising also declined- but 15% LESS than other media.
· Online advertising was the only area revenue increased (by 4%).
· Video had the largest growth, by +18% YOY.
Let’s talk about where the growth is coming in:
Online advertising now accounts for over half of all display advertising. The growth in online video across both broadcast and non-broadcast platforms, together with the increase in other forms of online display advertising such as banner advertising, has resulted in online advertising representing more than half of all display advertising for the first time.
While linear TV advertising, as a share of all display advertising, was broadly consistent between 2000 and 2015 at approximately 40%, between 2015 and 2020 its share fell by 12%; from 39% to 27%.153
(However, despite the increase in online, TV advertising remains the medium of choice for big brands wanting to reach an audience quickly and at scale, with advertisers citing TV’s ability to drive both short-term sales and longer-term brand equity as a major advantage.)
TV advertising revenue is set to rebound in 2021 but TV broadcasters must adapt to stay competitive
UK Advertising market:
There is still uncertainty about the speed of the recovery in the UK advertising market following the impact of the pandemic; it depends on the level at which economic activity resumes following the lifting of restrictions, and whether there are any further lockdowns in 2021 or beyond, but forecasts from AA/WARC Expenditure Report and GroupM currently project that:
· Revenues for total TV advertising will increase by 8.8% and 10.6% in 2021 respectively.
· And then with a further 2.1% and 3.2% increase in 2022. However, these figures won’t fully offset the declines resulting from the pandemic.
The ongoing recovery in television advertising is reflected in ITV’s recent Q1 2021 trading update, which reported that:
· ad revenues for April 2021 were up 68% compared to April 2020, while the four months to the end of April were up 6% compared to the same period in 2020.156
· Beyond 2021, growth in TV advertising revenue is forecast to come mainly from BVoD. AA/WARC Expenditure Report estimates a 13.9% increase in this medium in 2022, and GroupM forecasts an increase of 19.4%.
· On the other hand, TV advertising, excluding BVoD, is expected to have little or no growth in 2022 (with AA/WARC Expenditure Report predicting 0% growth and GroupM 0.8%).
BVoD:
To help accelerate the growth in BVoD advertising, commercial broadcasters have invested in a range of new technologies and initiatives:
• Improved cross-media measurement: Sky, ITV and Channel 4 recently announced that the cross-media measurement initiative CFlight, initially developed by Sky and its parent company Comcast, would become a jointly-owned product between Sky, ITV and Channel 4. CFlight enables advertisers to better understand the incremental reach of BVoD advertising when it is used alongside traditional TV spot advertising.
· But some would like the industry to go further by adopting a more comprehensive cross-media measurement system including not just TV and BVoD but also online video advertising from YouTube and social media platforms. To this end, the Incorporated Society of British Advertisers (ISBA) has been working with the World Federation of Advertisers (WFA) on a new multi-media cross-media planning tool called Project Origin. This initiative is supported by many of the UK’s largest advertisers, as well as several big tech companies including Google, Facebook, Amazon and TikTok. Project Origin is currently in the prototype stage, with early data due at the end of 2022. BARB is also building measurement capabilities for VoD, including refinements to Project Dovetail, which measures BVoD, and the use of household router meters which will introduce a level of capability for measuring SVoD and YouTube viewing in the home.
• Programmatic advertising technologies: Commercial broadcasters have been investing in new technologies which will enable advertisers to buy BVoD advertising on an automated basis. For example, ITV’s Planet V, launched in October 2020, allows advertisers and media agencies to purchase advertising inventory on a self-service basis across its video-on-demand service, ITV Hub, while Channel 4 has partnered with The Trade Desk157 to offer automated buying of video advertising on All4. This programmatic trading of BVoD ad inventory brings some of the advantages of online advertising to TV, including increased flexibility for existing advertisers, and lowering the barriers to entry for new ones.
• Addressable (targeted) advertising: In addition to enabling greater flexibility in the buying and selling of online BVoD advertising, advanced advertising technologies allow advertisers to target viewers more accurately. For example, viewers to the same programme may see different ads based on their location, demographic or previous buying habits. Addressable advertising has been made possible by the high number of homes connecting their TV set to the internet, which currently stands at 79% of TV households. Some estimates suggest that revenue from addressable advertising on TV screens was approximately £500m in 2019 and is forecast to grow.158 Addressable advertising is likely to be important to the future health of commercial PSBs; estimates suggest that by 2024, 25% of all commercial PSB broadcaster advertising revenue will come from connected TV screens.