AI is moving from experimentation to infrastructure in digital advertising

The UK’s digital advertising market continues to expand at pace. 

According to the latest IAB UK Digital Adspend Study, conducted with Oliver Wyman, digital ad spend reached £40.5bn in 2025, representing 10% growth year-on-year and significantly outperforming the wider UK economy. 

Alongside that growth, one theme is becoming increasingly clear: the role of AI and automation across digital advertising is accelerating rapidly. 

Nearly half of industry respondents, 48%, now identify AI as one of the most important forces that will shape the sector over the next decade. 

AI is reshaping how campaigns are built and traded 

For several years, AI in advertising was often discussed in terms of experimentation or emerging potential. Increasingly, however, it is becoming part of the core infrastructure that underpins the industry. 

AI is already influencing multiple stages of the advertising workflow. From media planning and forecasting to automated bidding and optimisation, machine learning is enabling campaigns to adapt faster and operate at greater scale. It is also reshaping audience modelling, creative production and measurement, helping marketers uncover deeper insights and improve campaign performance. 

Rather than replacing human expertise, AI is increasingly augmenting it by allowing teams to make more informed decisions and optimise campaigns more efficiently. 

Formats still drive growth 

While automation is transforming the mechanics of advertising, the formats that capture audience attention remain critical. 

Video was the fastest-growing major format in 2025, increasing 20% to £9.3bn and representing 23% of total digital ad spend. Social media also saw strong expansion, rising 21% to £11.5bn, with video now accounting for 59% of total social investment. 

These trends highlight the growing combination of AI-driven optimisation with high-impact creative environments, particularly across video and social platforms. 

A rapidly evolving ecosystem 

Elsewhere in the digital advertising market, search continued to dominate, growing by 6% to reach £17.9bn and representing 44% of total spend. Retail media also saw significant expansion, increasing 18% to £3.8bn as brands prioritised first-party data environments that enable clearer measurement. 

Other channels such as digital out-of-home, gaming and audio all recorded double-digit growth, reflecting advertisers’ increasing appetite for measurable, omnichannel activation. 

At the same time, the structure of the industry itself may continue to shift. More than three-quarters of respondents to the study anticipate significant consolidation across the sector in the coming years as companies adapt to technological and economic change. 

The next phase of digital growth 

Looking ahead, the UK digital advertising market is forecast to reach £44.7bn in 2026 and £49.1bn by 2027. 

AI will undoubtedly play a central role in shaping that future. However, success will depend not simply on deploying automation, but on using it intelligently. 

The organisations that thrive will be those that harness AI to enhance creativity, strengthen accountability and deliver meaningful outcomes for advertisers and audiences alike. 

Because the future of advertising will not be defined by AI alone. It will be defined by how effectively the industry uses it. 
 
Check our full Adspend report here.