Past Experience Augurs Well for a Post-Brexit Digital Ad Industry in the UK - eMarketer

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Past Experience Augurs Well for a Post-Brexit Digital Ad Industry in the UK

July 5, 2016


Tim Elkington
Chief Strategy Officer
Internet Advertising Bureau UK (IAB UK)

June 23 was a big day in UK politics—and a watershed moment for the nation as a whole—with UK voters approving the country’s exit (“Brexit”) from the European Union (EU). What does Brexit mean for the UK’s digital advertising industry? Tim Elkington, chief strategy officer at the Internet Advertising Bureau UK (IAB UK), spoke with eMarketer’s Bill Fisher about some of the potential implications and about how experience from the not-too-distant past might help provide some reassurances.

eMarketer: How big an issue is Brexit going to be to the marketing and advertising community? Or put another way, how many calls have you had to field about this so far this week?

Tim Elkington: Funnily enough we haven’t fielded any calls about it, but we did put out a statement at the start of the week because we think it’s important that as a trade body we’re here to help people.

I think the area that we can really add value is around GDPR [general data protection regulation]. We have a policy and regulatory affairs department that’s in touch with Westminster and Brussels and they know what the implications of Brexit will be for data protection in the EU and the UK. If I were to put myself in the shoes of a publisher or a media owner, I would ask what does it mean for GDPR? We’ve been working towards this big European thing, if we do leave Europe, what are we going to do?

eMarketer: Might Brexit have a fundamental effect on digital ad spending in the UK, or do you think because it’s been so resilient it will be able to take a hit?

Elkington: The most valuable thing we can do is see what’s happened before. So when we had the recession in 2008, the value of digital advertising [that year] was £3.3 billion ($5.0 billion) and it rose to £3.5 billion ($5.3 billion) in 2009, which was an increase of about 5.7%. Most years we’ve been seeing growth in the mid-teens—last year, for example, a robust 16.5%—and when the recession hit we saw growth of just under 6%. I think it’s a positive message that even in difficult times, we do still manage to grow.

“The short message is, we’ve had a recession before and we were reasonably resilient, so hopefully if any Brexit-related activity does affect the UK economy then we’ll still be resilient.”

Also worth thinking about is the different forces and pressures being applied to what the growth rate might be. Macroeconomic conditions may push it down. But you’ve also got to look at consumer trends—the continued adoption of mobile, the fact that companies are offering better services, and so on. If there’s a downward macroeconomic pressure, then there will also be an upward consumer pressure.

The short message is, we’ve had a recession before and we were reasonably resilient, so hopefully if any Brexit-related activity does affect the UK economy then we’ll still be resilient.

eMarketer: The referendum vote was very close, but there were much bigger imbalances across various demographic groups—young vs. old, for example. Might these kinds of splits have an influence on how marketers look to target these various groups?

Elkington: If you think about the way that people consume news, for example, it’s probably fair to say that the majority of the younger demographics are getting their news via social media, whereas newspapers have loyal [older] audiences. But it’s hard to speculate.

I don’t think there will be any long-term change in the way that marketers target different demographics. People are still people, and hopefully one day we’ll be able to put all this behind us and get on with our normal lives and people will just be targeted in the normal way.

eMarketer: What are some of the ways that European legislation has helped the digital marketing industry in the UK, and might things change if Article 50 [triggering the start of a two-year period of formal UK exit negotiations] is ever invoked?

“The future depends entirely on the outcome of the negotiations between the UK and the EU.”

Elkington: European legislation allows British companies to do business across 28 markets under one set of rules. This is a huge advantage for an industry as outward-looking and borderless as the digital marketing industry, because it removes the need for country-specific compliance procedures. EU rules may not be perfect, but they’ve at least streamlined the process of doing business for our industry.

The future depends entirely on the outcome of the negotiations between the UK and the EU. There might be opportunities to remove some of the more unhelpful aspects of EU law, but companies would have to factor in the lack of harmonized rules as a result and what that might mean for their operations across a range of markets.

The UK government is relatively sympathetic to advertising as a whole, which includes digital advertising, and it is quite pro self-regulation, so I think as long as an industry we continue to do a good job in terms of self-regulation, hopefully the government will be able to take a long-term view.

eMarketer: Many companies in the marketing and advertising space are global. Might we see operations scaled back in the UK if it becomes more expensive to do business here?

Elkington: I’m relatively optimistic about the UK’s future as a center of digital excellence because we’ve got great creative industries and great tech hubs, particularly in London. While I can’t speculate about future tax regimes, if it does become more expensive, I’m really confident that because of the skills, talent and infrastructure that companies have already set up here, then the future for UK advertising, digital advertising and tech looks really positive.

“I’m relatively optimistic about the UK’s future as a center of digital excellence because we’ve got great creative industries and great tech hubs, particularly in London.”

eMarketer: Do you think that certain brands or industries might be more affected than others?

Elkington: Again, the only thing we can do is look back to the last time we experienced this in 2008, and I think what you might see is people will stick to what they know and to doing stuff that they can attribute a very positive ROI to. So things that are slightly more difficult to measure, the long-term stuff, may be under more pressure than, say, the short-term, direct-response-type advertising, where you can very easily ascertain an ROI.

If budgets do come under pressure, people will want to demonstrate that they’re spending money in an effective way. Industries where it’s very easy to measure sales, where you can demonstrate ROI quite quickly, are probably the sorts of industries that will be most resilient.

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