UK ad spend increases a historic 9.7% as AI adoption and digital formats surge

The UK advertising market reached a historic milestone in Q3 2024, growing 9.7% to £10.6bn, driven primarily by digital advertising formats and AI adoption.

Market performance overview: The UK advertising sector demonstrated remarkable resilience despite economic uncertainties, with total spend reaching £30.1bn in the first nine months of 2024.

• Online display advertising grew by 15.2%, with social media showing a 17.8% increase
• Search advertising rose by 12.6%, reflecting continued investment in performance-driven channels
• Traditional media formats showed mixed results, with some experiencing significant declines

Digital transformation impact: The shift toward digital channels reflects both technological advancement and changing market dynamics.

• AI and automation tools are making performance metrics more visible and actionable for marketers
• Online display and search continue to dominate advertising spend, indicating a strong preference for measurable results
• Broadcasted Video on Demand (BVOD) saw an 8.7% increase, boosted by major sporting events

Traditional media challenges: Legacy formats faced varying degrees of pressure during Q3 2024.

• National news brands experienced a 5.7% decline in ad spend
• Magazine advertising dropped significantly by 16.4%
• Cinema advertising suffered the largest decline at 26.1%
• Out-of-home advertising bucked the trend with 4.4% growth

Sector-specific trends: Different industries showed varying levels of investment in advertising.

• The financial sector increased display spend by 6.9%, driven by digital disruptor brands
• Consumer packaged goods companies grew advertising by 4%, viewing it as a growth driver
• Household FMCG showed particularly strong growth at 21%

Direct mail revival: Traditional mail marketing showed unexpected strength with 12.9% growth.

• This represents the first growth in direct mail in over two years
• The format’s effectiveness particularly resonates with younger consumers less familiar with physical mail
• Marketers are exploring it as an alternative to saturated digital channels

Future outlook: The market shows promising growth trajectory despite economic headwinds.

• Total UK ad spend is expected to reach £40.7bn for full-year 2024, representing 11.2% growth
• 2025 projections indicate 6.9% growth to £43.5bn
• BVOD and online display are anticipated to lead growth in 2025
• The advertising market is forecast to outperform the broader UK economy

Market implications: While digital channels dominate growth, the data suggests a potential risk in overemphasizing short-term performance metrics at the expense of brand building, potentially affecting long-term marketing effectiveness and competitive positioning.