£129bn digital ad sector dwarfs farming and motor trade

The digital advertising industry has hailed its major contribution to both the British economy and jobs, as well as its high value to UK households, in a new study by industry body IAB UK, which maintains the sector is “crucial to the economic health of the nation”.

According to The Digital Dividend report, carried out with Public First, the industry not only contributes £129bn gross value added to the UK economy and supports 2 million jobs across the country, free, ad-funded digital services – such as email, social media, online news and streaming services – are worth an average £14,600 per year to every UK household.

In fact, for every £1 spent on digital advertising, £4.80 was delivered back to the economy in gross vale added (GVA), the study claims.

Drawing on economic impact modelling, data analysis, and consumer opinion research the study assess the value of digital advertising to the UK economy, its businesses and consumers.

The £129bn in GVA encompasses both the direct and indirect economic impacts of the digital advertising industry.
This breaks down as £39bn directly generated by businesses within the digital ad sector, such as agencies, social media platforms and adtech companies. This is greater than the direct impact of the UK’s legal sector (£34bn GVA) and twice as large as the agricultural industry (£19bn GVA).

A further £41.3bn is derived from businesses around the country that advertise online, benefitting from return on digital ad spend, while £48.5bn is supported by digital advertising along supply chains, i.e. generating increased demand for products and services such as office rentals or computer equipment.

Meanwhile, the actual cost saving for UK households of not having to pay for ad-funded digital services stands at £580 a year – almost four times the annual BBC licence fee.

In addition, the cost-of-living crisis is throwing the value of the ad-funded Internet into sharper focus, IAB UK maintains, with 70% of UK adults saying that it is important to them that online services are provided for free, while over a quarter of people have used free online entertainment more in the last year as a result of budgets being squeezed.

The benefits of digital advertising for businesses are also highlighted by the report. Those that invested in digital advertising in 2022 saw a combined total of £73bn in increased sales as a result, with £26bn of that among small and medium sized companies.

IAB UK head of policy and regulatory Christie Dennehy-Neil said: “The vast majority of us rely on the Internet every single day to stay in touch and informed – be it email, news, maps or social media – and the reality is that it’s only free because of advertising. This study provides much-needed insight into the huge contribution that the digital ad industry makes to the UK economy and how people value the vital services it funds.

“Having a deeper understanding of this is particularly important at the moment, with 85% of the population worried about rising inflation and the Government considering how to further regulate the digital ad sector. This can only be done effectively if the very real benefits that digital advertising delivers for people and businesses across the country are recognised and protected.”

Minister of State for Media and the Creative Industries John Whittingdale chipped in: “Digital advertising is growing from strength to strength in Britain. It contributes hundreds of billions to our economy, supports millions of jobs and ensures that consumers can enjoy hundreds of online services without charge.

“We want to maximise the potential of the creative industries and, through our Online Advertising Programme, we are cracking down on illegal ads so our advertising sector can continue to thrive.”

IAB UK’s chief executive Jon Mew concluded: “It’s hard to put such big numbers into context, but it helps if you consider that the direct contribution of the digital advertising industry to the UK economy is twice as large as the impact of the country’s agricultural sector, while the employment footprint is 50% bigger than that of the automotive industry. In short, digital advertising is crucial to the economic health of the nation.

“But digital advertising isn’t just contributing to the UK’s economy, it’s also having a huge impact on the lives of people right across the country on a daily basis. Without it, the services that the vast majority of us rely on to stay in touch, informed and entertained would cease to be free.

“Having a deeper understanding of this is particularly important at the moment as policy makers consider the future of digital advertising regulation. It is essential that the findings detailed in this report are taken into account throughout that process in order to protect the vast and varied benefits that the digital ad industry delivers for businesses and people around the country.”