Advertising: Digital ad market spend slows as budgets take post-Covid reset

Growth in the UK’s digital advertising market slowed in 2022 as economic headwinds continued to weigh on the market.

The digital advertising market – meaning any advertising delivered through digital platforms – grew 11 per cent to £26.1bn in 2022, according to industry body IAB’s digital ad spend report.

The market previously grew 41 per cent in 2021. 

“Whilst some advertisers are absolutely reducing budgets, overall the amount of money going into digital advertising has still gone up,” said Jon Mew, chief executive of IAB UK.

“The growth rate in 2022 is slower than 2021. But 2021 was a real exception because of the pandemic. We’ve seen a bit more normalisation of the market really,” added Mew.

Advertising budgets are often the first to be slashed by brands looking to reduce spending. Several have recently reduced their advertising spend to cut costs during tough market conditions. 

According to a recent report from the World Federation of Advertisers, just under a third of 43 multinational companies surveyed planned to slash their ad budgets in 2023.

Tech giants like Meta have been hit by a fall in advertising revenue, while streaming platforms like Spotify have reduced their marketing spend. 

Amid turbulent economic conditions, companies are also being more cautious about where they spend their ad budgets. 

UK-based retailers spent the most on search advertising, which grew by 13 per cent year on year, the IAB said. Meanwhile, spending on display advertising – which displays links, images and text to consumers – grew by 6 per cent to £10.4bn. 

The UK digital retail market – meaning the amount advertisers spend on retailer’s sites and apps – has been valued by the IAB for the first time at £176.4 million.

“Budgets are under scrutiny at the moment. So when they look at where they’re going to make their choices about where to invest, search is often seen as a staple for many advertisers,” said Stephen Chester, director of media at the industry body, the Incorporated Society of British Advertisers (ISBA). 

“But the question is, are advertisers getting increased reach? And actually, is consumer spend actually keeping track with that?”

Hannah Biernat, senior manager at PwC who also produced the report, added: “This year’s Adspend results reflect a stabilisation of the market growth in line with pre-pandemic levels, demonstrating the robustness of the industry and its ability to weather wider spread economic and political uncertainties.”