Bounce for broadcasters as advertisers increase their Christmas spending

The annual festive battle for the attention and disposable income of consumers is well under way, and advertisers’ spending on Christmas commercials is forecast to create growth in the shaky British TV advertising market for the first time since last summer’s Brexit vote.

Advertisers are expected to commit £1.2bn on TV ads to attract shoppers, with a record-breaking £6bn projected to be spent on all forms of marketing this Christmas.

The 1% year-on-year boost in TV ad spending expected in the fourth quarter will mark the first growth since the second quarter of last year, when the Brexit vote triggered a weakening in the economy that has resulted in advertisers tightening their belts for the best part of the last 18 months.

“The market has struggled this year but, as a medium, the ability of television to drive sales in the crucial fourth quarter remains undiminished,” says Phil Hall, chief commercial strategy officer at media buyer MediaCom UK, whose clients include Tesco.

“Marketers don’t have the luxury of holding back spend at Christmas: it is too important to retail businesses to be cutting spend in the same way they have done for the rest of the year.”

Leo Rayman, chief executive of Grey London, the advertising agency behind Marks & Spencer’s seasonal campaign, says: “The big Christmas ad season has in a way become the UK’s version of the Super Bowl. You have to create a big moment of impact in popular culture. A bad Christmas can make or break a brand.”

Christmas TV advertising has traditionally been dominated by retail brands such as M&S and John Lewis, but in recent years digital rivals such as Amazon and eBay have turned to television too. Thinkbox, the industry body that promotes TV advertising, says retail brands are being supplanted by online businesses as the biggest spenders.

The online business category – which Thinkbox defines as spending by online-only brands as well as the marketing of online services by traditional businesses – includes companies such as Amazon, Confused.com, Facebook, Google, Just Eat, Netflix and Purplebricks.com. It is expected that online businesses, which combined will spend almost £700m on commercials this year, will remain the biggest spending category of TV advertiser and one of the few that will show year-on-year growth.

Two of the biggest shows on television, Britain’s Got Talent and The X Factor, are sponsored by digital brands AO.com and Just Eat to the tune of about £16m annually. Amazon has climbed to the number two spot of top 10 UK TV advertisers, spending more than £20m on commercials in November and December last year, according to unofficial Nielsen figures. This was up 56% on 2015.

Only giant Procter & Gamble, which owns brands ranging from Max Factor and Gillette to Fairy and Old Spice, remains a bigger spender in the UK.

Advertiser demand for television airtime drops off significantly in the days before Christmas and over the festive period – once gift shopping is done and wallets are closed – which brings down the overall cost of December campaigns.

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So despite the huge demand for TV ad slots in the run-up to Christmas, December can still be quite a cost-effective month for advertisers to book campaigns, according to Jonathan Allan, Channel 4’s sales director. “It is almost like paying the price of three-quarters of a month,” he says.

Advertisers looking for those big-moment TV shows during the Christmas holidays have arguably the best selection in years on commercial channels, which, given the dearth of advertising, traditionally don’t provide much programming competition to the BBC during this period.

ITV is bringing back hit period drama Victoria for a special and has a feature-length edition of sitcom Birds of a Feather. Sky has the third and final season of popular crime thriller The Tunnel, alongside family-focused fare such as Ratburger, the adaptation of comedian David Walliams’s children’s book.

For Channel 4, the addition of The Great British Bake Off, which cost £75m for a three-series deal to take from the BBC, means the broadcaster is set for its biggest Christmas ever. Bake Off is making its Christmas debut for advertisers with a double helping of seasonal specials.

“The final of Bake Off was the second biggest programme on Channel 4 ever,” says Allan. “So in terms of volume [of viewers] it is the biggest Christmas show we have ever had, and advertisers love that. The shows are very warm, very Christmassy.”

Overall, a tough year for UK businesses has seen budgets cut, with the £5.3bn TV ad market forecast to be down 2.4% or £130m, despite the Christmas boost. The broadcasting industry is banking on the Christmas marketing bonanza translating into sales success for advertisers, in turn buoying brands’ confidence and returning the TV ad market to growth next year.

Broadcasters are optimistically pencilling in an early estimate of growth of 2.8% in 2018 and believe that TV can more than hold its own against the rise of digital players such as Google and Facebook, which are attempting to secure increasing shares of advertisers’ overall budgets.

“While digital advertising is vital and powerful, TV is in no way dead,” says Josh Krichefski, chief executive of MediaCom UK.

Lindsey Clay, chief executive of Thinkbox, believes that the outlook for television is bright, particularly as global advertisers such as Procter & Gamble and Unilever are leading a re-examination of the effectiveness of digital advertising, and taking the Silicon Valley giants to task over issues such as ads running next to inappropriate content from extremist groups or fake news sites.

“Momentum is returning to TV advertising,” says Clay. “With issues of fraud and brand safety dogging parts of internet advertising, advertisers are asking serious questions about where they invest, what works and what they can trust. 2018 could be TV’s year.”