IAB: digital adspend tops £26bn as retail media data revealed for first time

The UK's digital ad market is continuing to flourish, growing 11% in 2022 and hitting £26.1bn, according to the IAB's latest Digital Adspend report.

The IAB noted that the double-digit growth happened in spite of a challenging year, due to factors including the cost-of-living crisis, political upheaval and uncertainty as well as structural changes such as the removal of Apple's in-app Identifier for Advertisers.

Compiled with PwC, the study revealed that digital adspend has grown 56% since the start of the pandemic in 2020.

Search domination

Search continued to command the lion's share of digital outlay, accounting for half of all digital spend, growing 13% to £13.1bn. Display spend was up 6% to £10.4bn, mostly due to standard display ads (up 14%), while video budgets grew 9%, "largely driven by investment in outstream formats".

Retail media measurement a ‘hugely significant’ milestone

The IAB has responded to recent developments and investment in retail media. For the first time, the Digital Adspend report has measured the burgeoning discipline's spend, at £176.4m in 2022, establishing a benchmark for future comparisons. The figure relates to UK-based retailers, specifically measuring onsite spend. The IAB predicts that retail media will continue to grow in 2023, "becoming a key driver of digital's overall market growth as advertisers increasingly harness retailers' first-party data".

The IAB also found that growth in spend targeting desktop devices outstripped that aimed at mobile devices for the first time since records began in 2008, up 14% year on year vs an 8% rise. The IAB pointed out that it was a shift that coincided with Apple's aforementioned Identifier for Advertisers removal and "shows how structural changes are shaping the market". However, mobile continued to have the largest share of digital adspend, at 58%.

Simon Lonsdale, Strategy Director, Tesco Media and Insight Platform powered by dunnhumby, commented: “It’s hugely significant that digital retail media is in the IAB’s 2022 Digital Adspend report for the first time. 

“While various forecasts and estimates have been published over the past few months, this is the first official cross-market spend figure for the UK-based market, which reflects the growing importance of retail media to advertisers.

“Our priority is to evolve and grow our retail media business to allow advertisers to reach the customers that matter most to them at scale. We look forward to working closely with the IAB to pioneer the frameworks that are essential to underpin long-term growth and allow retail media to reach its full potential.”

Sonic boom

The seemingly inexorable rise in podcast popularity and investment in the format was reflected in the data: spend grew by 32% to £76.3m, a greater than threefold increase since the IAB began measuring it in 2020.

Jon Mew, IAB UK's chief executive, said the IAB report's findings highlighted two themes: resilience and opportunity.

"Not only was 2022 challenging for our industry, as it was for the entire UK economy, it also followed a year of stratospheric, pandemic-induced growth in 2021," he said. "In this context, it's testament to the resilience of digital advertising that the market has maintained double-digit growth in 2022 and astounding that it has grown by 56% since the pandemic began."

The IAB reported that "another area of strong growth was in a category that includes wearable devices and in-car advertising, indicating how advertiser spend is embracing the opportunities posed by new technology".

The IAB study follows last week's publication of the IPA Bellwether Report, which found that marketing budgets were up for the eighth consecutive quarter.

Mew added: "Today's results also reflect the growing opportunities for advertisers to resonate with audiences in new ways. Of course, search and display spend still underpin the digital ecosystem, but the UK's flourishing retail media market – officially sized for the first time in this report – alongside the continued growth of podcasting, show how digital is diversifying to offer advertisers more choice and more immersive routes to connect with consumers."

Hannah Biernat, senior manager at PwC, described this year's report findings as reflecting "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".

She continued: "Clients appear to be embracing connecting with audiences in emerging formats as demonstrated by the growth in podcast investment and formats across connected devices. It will be exciting to see how the industry continues to innovate and diversify in formats and channels in the coming year."

“Huge swathes of people are now ‘unaddressable’”

Niall Moody, Chief Revenue Officer at Nano Interactive, added: “While it’s encouraging to see digital ad spend rise in spite of the cost-of-living crisis, we also know acquisition costs are being hit by rising inflation and challenges using personal data to target people online. This trend shows no signs of slowing with growing consumer data privacy concerns, continued changes in data usage from tech giants and government regulations. 

“As a result, huge swathes of people are now ‘unaddressable’ via cookies, profiling and other people-based methods. This is reducing the scale and effectiveness of online advertising just as marketers are coming under even more pressure to deliver results. In 2023, you no longer need to know who someone is to deliver effective advertising online. Brands and advertisers who embrace new targeting models free of personal identifiers will be well placed to navigate this increasing signal decline and futureproof their campaigns.”