Overall, it's been a soft start to the year for advertising. However, with expectations that inflation will recede in the second half of the year, growth is expected to recover. Relative to 2022, growth is expected to slow this year as we overlap comparisons to a strong first half of 2022 and as higher interest rates impact the marketing spend of digital endemic advertisers that have spent heavily in previous years.
Retail media is one of the fastest growing channels, expected to grow 15.1% in 2023 and reach £7.4bn by 2028. While the retail media space continues to be dominated by Amazon, there are growth opportunities for more locally focused retailers like Sainsbury’s, Boots and Tesco.
Media trends framework
Advertising, a partial or primary revenue stream for four of the five largest public companies, by market cap, is a central pillar in conversations spanning technology, culture, government and the economy. To help make sense of all the ways in which these ‘external’ factors will impact advertising over the coming months and years, we’ve developed a framework modeled on a PEST analysis.
This would not serve a fatal blow to TikTok’s parent company ByteDance, it but does point to the ongoing separation of the internet and ad economy between China and rest-of-world.
POTENTIAL TIKTOK BANS
It may soon become imperative to exclude political advertising in non-U.S. markets. On its own, U.S. political spending would rank 11th in ad revenue by country.
POLITICAL ADS
Regulators are weighing laws that would make social platforms more responsible for misinformation on their sites. This could impact development resources allocated to advertising product upgrades or innovation over the near term.
MISINFORMATION
Independent news and media organizations still play a critical role in providing communities with responsible and trustworthy journalism. Maintaining news investment can be a strategic option for advertisers looking for brand-suitable environments.
DIGITAL NEWS
Recent EU rulings on GDPR compliance (including a $1.3 billion fine for Meta) will likely lead to share shifts rather than systemic decline.
DATA PRIVACY
Legislators are weighing content and platform restrictions against historical precedent of Section 230 and similar laws. In the meantime, creating alternative campaign plans and budget allocations is often worth it as it provides the advertiser with the credible ability to walk away from a negotiation if the media partner is unable or unwilling to meet their terms.
Section 230
Big Tech has been a particular focus of antitrust agencies in the U.S. and Europe. This is likely to lead to continued development of smaller media and advertising players over the near-to-medium term.
ANTITRUST CLIMATE CHANGE
Increases in shipping costs (tied to China’s developing nation status) could lead to a reduction in Chinese sellers advertising abroad in the future.
GEOPOLITICS
POLITICAL, LEGAL, REGULATORY:
2023 U.K.
Mid-Year Forecast
5.0% Canada
Growth
5.1%
U.S.
Growth
4.8%
U.K.
Growth
4.2%
France Growth
6.0% Germany
Growth
6.6%
Brazil
Growth
0.2%
Australia
Growth
12.0%
India
Growth
4.8%
Japan
Growth
7.9%
China
Growth
U.S.
1
5.0%
2024 Growth
2023 Ad Revenue
$322.5 B
2023 Growth
5.1%
2024 Growth
8.1%
2023 Growth
5.0%
2023 Ad Revenue
$19.7 B
Canada
7
2024 Growth
6.4%
2023 Growth
7.9%
2023 Ad Revenue
$150.6 B
China
2
2024 Growth
3.2%
2023 Growth
4.8%
2023 Ad Revenue
$52.6 B
Japan
3
2024 Growth
13.6%
2023 Growth
12.0%
2023 Ad Revenue
$17.3 B
India
9
2024 Growth
0.7%
2023 Growth
0.2%
2023 Ad Revenue
$14.0 B
Australia
10
2024 Growth
5.2%
2023 Growth
6.6%
2023 Ad Revenue
$19.2 B
Brazil
8
2024 Growth
5.3%
2023 Growth
4.8%
2023 Ad Revenue
$49.4 B
U.K.
4
2024 Growth
9.7%
2023 Growth
4.2%
2023 Ad Revenue
$26.9 B
France
6
2024 Growth
5.0%
2023 Growth
6.0%
2023 Ad Revenue
$36.1 B
Germany
5
TACTICAL
STRATEGIC
EMERGING OPPORTUNITIES
Print continues to face significant challenges despite there being increased focus on digital offerings as demand is declining and production costs are increasing. We expect newspapers and magazines together to decline 3.9% in 2023 and 2.0% in 2024.
Much of 2023's growth is expected to come from pure-play digital, growing 6.5%. Overall, digital continues to account for the largest share of the U.K.'s advertising revenues, contributing 80.8%.
We expect U.K. advertising revenue to grow
4.8%
in 2023 and accelerate to 5.3% in 2024.
Channel updates
digital
retail media
AUDIO
PRINT
TELEVISION
+6.5%
+15.1%
-1.2%
-3.9%
-2.9%
We are likely to see a “superbloom” of AI-backed start-ups gain scale over the next two-to-five years, with many consumer-facing companies using advertising to acquire users and grow revenue. This could lead to another period of advertising growth above-and-beyond expected GDP growth.
START-UP BLOOM 2.025
The three key drivers of secular advertising growth are maturing:
INDUSTRY MATURITY
EMERGING OPPORTUNITIES
Streaming businesses are likely to maintain competitive spending on content, especially sports rights and local language content, as the battle rages for global subscriber and revenue growth.
CONTENT SPENDING
We estimate the global e-commerce share of retail sales will hit 19.3% this year, up from 18.8% in 2021, and 14.5% in 2019, pre-pandemic.
Global expansion of retail and e-commerce platforms is more challenging logistically than scaling a fully digital product like short-form video.
E-COMMERCE PENETRATION
STRATEGIC
As interest rates rose over the last 12-18 months, we noted a deceleration (and in some sectors
a decline) in marketing and sales expenses among digital endemics The slowdown in digital endemic advertising aligns to ad revenue declines between Q2 of 2022 and Q1 of 2023.
INTEREST RATES
We have reached a point where continued price increases have led to added “friction” in consumer spending.
GLOBAL INFLATION
TACTICAL
Economic:
The largest advertising markets also have some of the largest percentages of adults over 65.
GENERATIONAL SHIFT
EMERGING OPPORTUNITIES
Ad revenue has followed shifts in time spent and in 2022 more than a quarter of global ad revenue was spent on the largest UGC platforms (ex-China).
UGC VS. PROFESSIONALY PRODUCED CONTENT
STRATEGIC
Globally, as content and audiences move to streaming platforms with on-demand models, sports has remained the key driver for live TV viewing. The move to streaming and digital assets could have a significant impact on how sports are consumed, with the ability for leagues and media owners to offer more personalized or tailored content.
SPORTS & SPORTS RIGHTS
Consumers are likely to pay for whichever services are investing in quality content, and there is ample headroom for total SVOD consumer spending, especially in markets where pay TV penetration has been historically high.
CONSUMER SPENDING ON VIDEO
TACTICAL
Social:
nothing here
EMERGING OPPORTUNITIES
The less interruptive nature of these messages could broaden the appeal of ad-supported streaming products.
Dynamic Insertion
The benefit of generative AI is likely to improve with the creation of closed or proprietary tools or AI sandboxes.
PERSONALIZATION AT SCALE
We may never have purely autonomous AI agents as members of the marketing team, but there are opportunities for AI to perform categories of tasks.
AUGMENTATION
STRATEGIC
Use of AI should be transparent to audiences, and the goals created for AI optimization must be scrutinized for potential harm and unintended consequences.
TRANSPARENCY, TRUST AND INTENT
Search advertising will account for 22.6% of advertising. Search is happening on video, retail and social platforms. The injection of AI into the channel and expansion of conversational search will lead to further evolution.
SEARCH
Without much discussion, standardization or controls, we’re already using AI to inform half of all ad revenue. This will surpass two-thirds of ad revenue by 2028.
AI & ADVERTISING
TACTICAL
Technological:
U.K. ECONOMY
According to the Bank of England, mortgage holders rolling off a fixed rate over the second half of 2023 are expected to pay
For TV (including both linear and digital), we expect an overall decline of 2.9% during 2023 as advertisers remain cautious amidst this uncertain macroeconomic environment. As viewing habits migrate toward a more digitized TV future, we expect streaming players such as Sky, ITVX and Netflix to ramp up investment, scale and advertiser transparency.
Radio is expected to decline 1.2% this year as growth now normalizes post-pandemic, where the government increased spend on Covid-19 and Brexit communication campaigns. Relative to last year, we expect that the growth of podcasts is moderating as media owners work out monetization strategies.
OOH
+7.1%
While OOH continues its postpandemic recovery with 7.1% growth in 2023 and digital OOH is expected to grow faster than retail media this year, we expect OOH will surpass 2019 levels in 2024.
"Much of 2023's growth
is expected to come from
pure-play digital, growing 6.5%."
The IMF projected in April that global inflation would be 7.0% in 2023 — better than 2022’s 8.7%, but still well above “normal” levels.
Unemployment levels remain low with the U.S. at 3.7% (May 2023), Germany at 2.9%, Canada at 5.0% and the EU at 6.1% as of April 2023.
The three key drivers of secular advertising growth are maturing:
INDUSTRY MATURITY
Spending by Chinese advertisers abroad.
Creative destruction
High-intensity digital endemic advertisers
Spending by Chinese advertisers remains an important secular driver, although its size and geographic distribution also remain a significant unknown going forward as geopolitical tensions may limit the ability of Chinese platforms and manufacturers to operate profitably overseas.
The creation of new businesses continues, and current regulatory scrutiny of mergers and acquisitions may actually increase competition, leading to greater advertising intensity
We are likely to see a “superbloom” of AI-backed start-ups gain scale over the next two-to-five years, with many consumer-facing companies using advertising to acquire users and grow revenue. This could lead to another period of advertising growth above-and-beyond expected GDP growth.
START-UP BLOOM 2.025
The three key drivers of secular advertising growth are maturing:
INDUSTRY MATURITY
The three key drivers of secular advertising growth are maturing:
Spending by Chinese advertisers abroad.
Creative destruction
High-intensity digital endemic advertisers
INDUSTRY MATURITY
EMERGING OPPORTUNITIES
Higher interest rates led to more conservatism and decelerating growth of advertising expense, and as these companies mature, advertising as a percent of revenue is likely to approach the levels of industry incumbents.
STAT CALLOUT AT BOTTOM OF PAGE 41
The development of mixed reality goggles, on top of the ongoing evolution of smartphone cameras and a behavioral shift from text to images, are likely to support a move to more image-based search.
retail revolution
£220 more
£41.6 billion.
U.K. advertising in 2023 will total
Contact
U.K. ADVERTISING GROWTH
2023 U.K. CHANNEL SHARE
Explore various editions of This Year Next Year:
KATE SCOTT-DAWKINS
PRESIDENT, BUSINESS INTELLIGENCE
NIDHI SHAH
ANALYST, BUSINESS INTELLIGENCE
For inquiries, please write: business.intelligence@groupm.com
in monthly interest payments as rate increases strain household budgets.
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