Spot the difference: 60 years of TV adspend

Following the publication of the latest UK adspend forecasts, James McDonald, research analyst at Warc, shows how the traditional TV spot continues to be a powerful form of advertising in the UK.

TV advertising expenditure is expected to top £5bn in the UK in 2015 following its sixth consecutive year of growth, according to the latest data from the Advertising Association/Warc Expenditure Report, released this week.

The data show that, while total TV ad revenues grew just behind forecast at 5.8% in 2014, with adspend of £4.9bn, this was still the strongest rise since the start of the economic recovery in 2010. Further growth, of 5.1% and 5.5%, is forecast for 2015 and 2016, respectively.

The traditional TV spot has been a mainstay for the sector since ITV launched as the UK’s first commercial broadcaster and screened its first ad 60 years ago. At a time when Winston Churchill had just retired, Cardiff had become the capital of Wales, and The Ladykillers had been released, it would have been hard to foresee the importance this form of advertising would continue to have in the UK today.

In 1994, TV spot advertising accounted for around 42% of total display advertising (excluding direct mail) and, 20 years later, despite the substantial growth of internet advertising, the channel has maintained broadly the same share.

Indeed spot advertising, benefiting from the live broadcast viewership of the football World Cup, increased 5.4% year-on-year to reach £4.5bn in 2014, the highest total ever recorded. We forecast growth to continue, however it will slow to 4.4% this year.

Within spot, the combined total for the flagship channels of ITV, Channel 4 and Channel 5 hit £2.5bn in 2014, a 2.9% rise on the previous year. However, this total was down by almost 25% from a peak of £3.3bn in 2000.

One cause of this shortfall is the increase in the number of commercial channels available to viewers in the UK over the last 15 years. Excluding the BBC portfolio and the Welsh language S4C, BARB reported some 260 channels in the UK last year, up from around 155 ten years earlier. During this period, the three main commercial broadcasters’ share of spot ad revenue fell from 80% to less than 58%.

While spot has remained a stalwart for TV advertising, other revenue streams have grown over recent years. Around 10% of total TV adspend this year – just over half a billion pounds – is forecast to come from sponsorship, video-on-demand (VOD), product placement and advertiser-funded programming.

Warc began to monitor sponsorship spend in 1989, and by the end of next year we forecast ad revenues to rise to £270m, around 5% of the total. Further, broadcaster video-on-demand (VOD) – sites such as ITV Player and 4OD – is expected to provide a 4% share of the TV total next year, when adspend should top £200m on the back of 21% growth.

Matt Hill, research and planning director at Thinkbox, commented: “There were 800 new or returning advertisers on TV in 2014. They were attracted not least by the fact that no other form of advertising comes close to the positive impact TV has on businesses.

“We are seeing investment in all the ways brands can now use TV, from spot as the bedrock to new opportunities within Broadcaster VOD and addressability, together with a growing sense of partnership and collaboration between brands and broadcasters.

“These figures show the strength, resilience and flexibility of TV as well as brands’ knowledge of what TV advertising does for them.”