EE, Virgin Media, Facebook: Everything that matters this morning

Good morning and welcome to Marketing Week’s round-up of the news that matters in the marketing world today.

EE and Virgin Media fined £13.3m for overcharging customers

Ofcom has fined EE and Virgin Media a combined £13.3m for overcharging phone and broadband customers who wanted to leave their contracts early.

The regulator found that EE, which was fined £6.3m, overcharged 400,000 customers who ended their contracts early, meaning in total they overpaid by up to £4.3m.

EE admitted it had “miscalculated early-exit charges”, meaning that the affected customers were allowed to pay a lower price while they remained with EE, but were treated as if they were paying a higher price if they wanted to leave.

Almost 82,000 Virgin Media customers were overcharged a total of just under £2.8m, resulting in a £7m fine for the company.

For almost a year Virgin Media charged early-exit fees that were higher than customers had agreed when they signed up to their broadband contracts. While the average amount overcharged was £34 per person, Ofcom found 6,800 customers were overcharged by more than £100.

Ofcom ruled that both companies failed to set out the charges customers would have to pay if they ended their contracts early. Under Ofcom rules phone and broadband companies can charge customers who decide not to stay with them for the minimum term of their contracts, but the charges must be made clear.

Gaucho Rasmussen, Ofcom director of investigations and enforcement, said that EE and Virgin Media had broken the rules by overcharging people who ended their contracts early.

“Those people were left out of pocket, and the charges amounted to millions of pounds. That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers,” he added.

Virgin Media now plans to appeal its £7m fine in the Competition Appeal Tribunal, a penalty it describes as “both unjustified and disproportionate”. EE, however, said it accepts Ofcom’s findings and has changed the way it calculates early termination charges.

Facebook denies PR smear campaign to discredit rivals

Facebook denies trying to discredit its critics and embarrass rivals through a targeted PR strategy used to “deflect” criticism.

The New York Times reports that Facebook worked with US PR firm Definers, which circulated a document suggesting philanthropist billionaire George Soros was the hidden backer of anti-Facebook movement Freedom from Facebook.

The strategy implemented by Definers allegedly included urging reporters to investigate possible financial ties between Soros and Freedom from Facebook, and trying to discredit anti-Facebook protesters as anti-Semitic.

The New York Times also alleges that Facebook ordered the publication of derogatory articles about rivals, watered down posts about Russian election interference and was too slow to act, as well as considering dragging rival companies into its controversies.

Open Society Foundations, run by Soros, confirmed it had not made any grants to support campaigns against Facebook, describing the social network’s behaviour was “astonishing” and threatening the “very values underpinning” US democracy.

Facebook denies several of the claims, including that CEO Mark Zuckerberg or chief operating officer Sheryl Sandberg had been “in the loop” about Definers’ behaviour. The social network ended its relationship with the PR firm on Wednesday.

However, Facebook did say that it wanted to show Freedom from Facebook was “not simply a spontaneous grassroots campaign”, but that the movement was “supported by a well-known critic” of the company.

Instagram expands shopping to in feed videos

Instagram is enhancing its shopping function by enabling users to shop direct from videos in their feed. To shop via video users will be able to tap the shopping tag in the bottom left corner to learn more about the featured products.

The social network is also allowing users to save products they see in their Instagram Stories, or on their feed, to their shopping collection by tapping on the product tag and pressing the save icon in the bottom right corner. The product will then be saved in the user’s shopping collection, which can be accessed from their profile.

In addition, Instagram is testing a redesign of the ‘shop’ tab on business profiles, which would enable users to quickly view all the products featured in the brand’s shopping posts. Users visiting a business profile will be able to tap on the ‘shop’ button to see details of the products on offer, such as the item name and price, enabling them to see all the products from that brand in one place.

Launched first in March, Instagram Shopping was extended in September with the introduction of product stickers in Stories and a shopping channel in Explore, enabling users to shop from brands they follow as well as brands they had yet to discover.

Apple moves further into original content with A24 deal

Apple is ramping up its competition with Netflix and Amazon after agreeing a multi-year deal to make a series of new films.

The technology giant has signed a deal with A24, the Oscar winning studio behind such acclaimed films as Lady Bird and Moonlight, though it has not yet disclosed how the content will be released and on what platform.

The move comes after Apple previously agreed deals with a range of Hollywood stars including Oprah Winfrey, Reese Witherspoon and Jennifer Aniston to make original programmes. The company has set aside $1bn for its initial batch of programming.

In addition, Apple is working with Steven Spielberg on a remake of his science fiction anthology series Amazing Stories and will back a new project by La La Land director Damian Chazelle.

The company’s move into original content comes as the online streaming market becomes increasingly competitive. Earlier this year, The Economist projected that Netflix will spend up to $13bn on original programming in 2018 alone, while both Disney and WarnerMedia are set to launch their own streaming services in 2019.

Mattress brand Eve searches for funding after ‘strategic missteps’

Mattress brand Eve Sleep is hoping to raise three-quarters of its market value to fund a new strategy after its share price faltered following a number of “strategic missteps”.

The Telegraph reports that Eve hopes to raise £15m to fund its “refocused” strategy, focused on the UK and French markets, expanding its product range, enhancing deliveries and improving its online sales conversion.

The direct-to-consumer business, which went public in May 2017, has seen its share price drop from 110p-per share to 15p, meaning the company which listed with a £140m valuation is now worth just £20m.

In March Eve posted a pre-tax loss of £19m for the 12 months ending 31 December 2017, up 68% on the previous year. The company attributed its losses to its marketing costs, which rose 119% to £17.2m in 2017.

A profit warning followed in July, with Eve reporting sales growth of 61% to £18.6m in the first half of the 2018, coming up short of the 100% growth it had anticipated. Co-founder and chief executive Jas Bagnieowski then announced his departure with immediate effect

Thursday, 15 November

Iceland sets life-size orangutan free in London streets

Iceland has unleashed a life-size “distressed” orangutan on the streets of London as part of a wider campaign against deforestation for palm oil.

The move comes after the frozen food giant had its Christmas ad banned after Clearcast deemed the Greenpeace advert could not be shown on TV because of Greenpeace’s political roots.

Iceland hopes the displaced ape, which is controlled remotely thanks to animatronics, will help highlight the retailer’s palm oil-free offerings, which includes a Christmas selection featuring mince pies, vegetarian meals and desserts.

Additionally, Iceland has previously pledged to eliminate the ingredient from all its own-label products by the end of this year.

“Our stranded, distressed Orangutan is a stark and potent symbol of the effects of deforestation. We always try to give people a real choice about what they buy and this was a key driver of our decision to allow Iceland customers to join us in saying ‘no to palm oil,” Iceland managing director Richard Walker says.

“We are determined to be at the forefront of efforts to guarantee palm oil is not causing rainforest destruction and Iceland will continue to be a driving force until this environmental impact is drastically reduced.”

A rainforest area the size of 146 football pitches is cleared every hour to make way for palm oil production. It’s production also contributes to the death of 25 orangutans every day, according to Greenpeace.

The Sun to donate one penny for each copy sold on 19 November to Movember

The Sun has pledged to donate one penny for every issue sold on 19 November to the Movember Foundation in a bid to support men’s health.

The move is part of a wider campaign aimed at driving awareness of some of the biggest health issues faced by men, including prostate cancer, testicular cancer, mental health and suicide prevention.

Activations kicked off with a ‘Great British Shave Off’ at a barber shop in central London. Other activities include a video series where celebrities will discuss how they’ve been directly affected by mental health, prostate cancer or testicular cancer plus digital takeovers of The Times and The Sun online.

This year’s campaign is set to run across News UK’s print and digital channels and will be extended through their video ad technology and data agency, Unruly.

News UK, The Sun’s owner, is also partnering with TalkSport, while Movember staff will be invited to sit in on the News UK department.

Juliette Smith, CMO of the Movember Foundation, says men’s health is “in crisis”, adding that this year’s partnership allows the charity to put its cause at the heart of News UK’s campaign.

“There is a real buzz about this year’s campaign and all indicators are positive, and importantly we have generated lots of great conversations about men’s health, though now it’s about ensuring as many people raise as much money as possible and get those donations coming in,” she adds.

Brits watch five hours of video a day

Brits are watching five hours of video a day, and live television is the most popular form accounting for 56% of all the video the UK watches at two hours and 38 minutes a day, a new study by Thinkbox has revealed

According to the study, there are eight reasons for watching: to unwind, which accounts for 26% of time spent; to distract (18%); for comfort (16%); to stay in touch (12%); for the experience (10%); to indulge (9%); to escape (7%); and to seek practical information (2%).

Brits say the reason they watch opt to watch live TV is because it helps them stay in touch with the world and share viewing experiences, while those who watch on-demand subscription services such as Netflix say it’s because they can lose themselves in another world.

However, young viewers are more likely to choose the latter as a form of escapism, accounting for 42% of 16- to 34-year-olds viewing in this need state (escapism) compared to live TV’s 24%.

Online video like YouTube is used for a “quick distraction” or practical needs.

Matt Hill, research and planning director at Thinkbox says : “This research explains why different forms of video co-exist and why TV broadcasters’ live and on-demand offerings continue to make up the vast majority of video viewing time.

“It also shows how services like Netflix have emerged to superserve some of our needs when we watch TV, but that they can’t reach all the places TV can – especially the more social and shared reasons to watch, which are so important to people. And it shows how YouTube is often ‘UseTube’, with a distinct role for practical help,” he adds.

While there are similarities across age brackets, the research did identify some significant differences . Younger people want more distraction, with 29% of 16- to 24-year-olds saying their total viewing is to satisfy the ‘distract’ need state, compared to 13% of 55- to 64-year-olds.

Ebay unveils new-look advertising offer

Ebay has launched a new ‘insights and influence’-based advertising offer as a response to calls from brands looking for more transparency and effectiveness.

Ebay says the offer is designed to help advertisers deliver impactful campaigns by providing greater control and better insights.

The team will work with brands and agencies in a bid to help them understand, target and influence customer groups at scale, from early stage inspiration through to purchase. EBay will also be in-housing its sales function as well as developing its own ad tech stack.

Phuong Nguyen, general manager of advertising says: “This evolution of the eBay Advertising business is a statement of our commitment to the UK market, and a strategic response to the rapidly changing and converging media and e-commerce landscapes. There are huge opportunities for brands to get closer to their customers and make a bigger impact.”

The offer will be available across Europe, and reflects eBay’s ambition to grow its advertising business, as revealed during its Q3 results.

EE launches Britain’s first mobile gaming tournament

EE is launching the UK’s first mobile gaming tournament, donned EE Mobile Series, which offers gamers the chance to win a place in professional esports team, Fnatic.

The competition will feature three stages of gaming, resulting in an eight-player live final that will be held at the BT Sport studio in London in January. For the inaugural tournament, EE is challenging participants to lead their Royale Family to victory in the game Clash Royale.

The top 16 players from each open qualifier will be seeded into four groups before advancing to the group stages to be held in December. All group stages and the final will be broadcast live on Twitch and other major streaming platforms.

Pete Jeavons, director of brand marketing at EE, says: “EE is committed to providing an awesome gaming experience wherever our customers go. Who says you can’t use your smartphone and our superfast 4G network to win a spot on one of the world’s best esports teams?”

Wednesday, 14 November

Advertisers’ Christmas spend to hit record £6.4bn

Businesses will spend £6.4bn on Christmas advertising throughout the final quarter of the year, up 5% on 2017, according to economic forecast data from the Advertising Association.

Brands spent £6.1bn on festive advertising during the last quarter of 2017, meaning 28% of the total £22.1bn spent on advertising last year was invested in the run-up of Christmas.

Music plays an important role in many brands’ Christmas campaigns – this year has seen renditions of classics such as Fleetwood Mac’s ‘Go Your Own Way’ (Tesco), Robbie Williams’ ‘She’s The One’ (Boots) and the New Radicals’ classic 90s song, ‘You Get What You Give’ (Sainsbury’s), with rumours Elton John might appear in this year’s much-awaited John Lewis ad. Given music is so important, the Advertising Association commissioned a separate piece of research into consumers’ attitudes towards the music that appears in Christmas ads.

It finds Coca-Cola’s ‘Holidays are Coming’ is the nation’s favourite festive tune, while Irn Bru’s cheeky version of ‘The Snowman’ from its 2011 ad (see below) and Lily Allen’s cover of ‘Somewhere Only We Know’ from John Lewis’ 2013 ad complete the top three.

Nearly one in five people associate a particular song or artist with a Christmas ad and a similar number have searched online for Christmas ads so they can listen to the music, leading more than one in 10 to become fans of an artist or song.

Karen Fraser, leader of advertising think tank, Credos says: “Advertisers are increasing their investments in Christmas advertising year-on-year, because they know Christmas advertising works. As the UK high street faces an uncertain future, Christmas is one of the key periods for retailers. Advertising helps stores attract customers, and that helps sustain jobs and high streets in the UK. We need advertising, and we need Christmas advertising in particular.”

WeWork valued at $42bn after cash injection

Office sharing business WeWork has been valued at $42bn following a $3bn cash injection from its largest investor, SoftBank, making it one of the biggest startups globally.

SoftBank will pay the investment in two instalments of $1.5bn, the first in January 2019, followed by another in April.

The investment means WeWork will be bigger than Airbnb, SpaceX, PwC and the Ford Motor Company.

There are fears, however, that the company’s growth is unsustainable after its net losses in the nine months to the end of September hit $1.2bn, nearly four times that of the same period the previous year.

Flybe up for sale after losses expected to hit £22m

Regional airline Flybe has put itself up for sale, a month after warning its full-year losses would reach £22m as a result of falling consumer demand, a weaker pound and higher fuel costs.

The airline’s board confirmed it was “in discussions with a number of strategic operators about a potential sale of the company”.

Stobart Group is thought to be a possible purchaser, according to Sky News. It made a bid to buy Flybe earlier this year but the offer was rejected by the airline.

The airline, which serves around eight million passengers a year, has seen its shares fall by almost 75% since September. It is now valued at £25m, far less than the £215m is was valued at when floated in 2010.

Study reveals generational divide in use of diverse imagery

Three quarters (74%) of UK marketers say they changed the way they choose images for advertising following the Advertising Standards Authority’s clampdown on gender stereotyping, according to a study Censuswide on behalf of image library Shutterstock.

The ASA first announced it would be tackling the use of harmful gender stereotypes in July 2017, following which just 57% of UK marketers in last year’s survey said it would impact the images they chose.

Just over half of UK marketers (51%) suggest their company does have some concerns that gender-neutral advertising could impact the bottom line, though.

Using images that represent modern day society is important for 45% of UK marketers, however this has dropped from 51% in 2017.

Globally, the survey, which in addition to the UK covers Australia, Brazil, Germany and the US, finds marketers of different age groups have looked to use more diverse imagery to varying degrees. While 26% of generation Z and 27% of millennials have started using images featuring same-sex couples, for example, just 18% of generation X and 12% of baby boomers have. Similarly, 35% of generation Z and 37% of millennials have looked to include more racially diverse models, compared to 27% of generation X and 16% of baby boomers.

Likewise, when it comes to featuring people with disabilities in advertising, 27% of generation Z and 25% millennials have done so, versus 17% generation X and 12% baby boomers.

“The research shows that while generation X understands the value of featuring diverse people in their campaigns, they are less likely to follow through on this compared to generation Z and millennial marketers,” says Lou Weiss, Shutterstock’s CMO.

“This year’s research illustrates not only the stark generational differences among marketers as they chose imagery for their campaigns, but also the various motivations behind these image choices and how they differed by country. There is clearly a shift occurring in our industry as the next generation of marketers find their footing and visualise their beliefs related to diversity of race, gender and abilities in the marketing campaigns they’re creating.”

EE names first 5G cities

EE has confirmed London, Cardfiff, Edinburgh, Belfast, Birmingham and Manchester will be the first cities in the UK to get faster 5G mobile networks.

5G will be turned on in these cities in the middle of next year, with another 10 cities to be added to the network before the end of 2019.

Marc Allera, head of the consumer division at EE-owner BT has said customers will “pay a little more” for the service given its speed and responsiveness.

Vodafone, O2 and Three are also trialling 5G networks.

Tuesday, 13 November

Mr Kipling brand relaunch helps sales growth at Premier Foods

Premier Foods saw revenues rise 1.3% in the first half of the year as the relaunch of the Mr Kipling brand and product innovation at its Batchelors brand drove growth. Half-year trading profit was up 6.2% to £51m, while net debt was £26m lower, with CEO Gavin Darby saying this performance shows the resilience of the group despite the hot summer.

“Mr Kipling, the Group’s largest brand was key to this growth following an excellent consumer response to its brand relaunch in the UK with revenues up 13%. Batchelors, the Group’s third largest brand, delivered revenue growth of 6.8% as consumers continue to enjoy its new convenient pots range,” he explains.

Premier Foods is now in discussions with third parties to sell its Ambrosia brand, while Darby is set to leave on 31 January after six years in the job.

British consumers rein in spending

British consumers reined in spending in October, adding to signs that economic growth is slowing in the final quarter of the year. Consumer spending declined 0.2% year on year, the first drop in three months.

Face-to-face spending fell by 2%, the biggest decline in six months. However, online retail was up 2.6% year on year.

“No doubt this disappointing reading will cause some concern for high street retailers as we head into the key Christmas shopping period,” says Visa economist Adolfo Laurenti.

P&G tests smartphone app and social network for haircare brands

Procter & Gamble is reportedly testing a smartphone app and social network for its haircare products that enable people to determine which products best suit their hair and to connect with people with similar hair types.

According to the Cincinnati Business Courier, the app began testing in Colombia and is set to roll out across the US this month. It features the ability to match P&G products with hair types such as straight, oily or wavy, as well as thickness and sensitive skin. They can also enter preferences such as if they want aloe or almond ingredients in their haircare brand, plus their address so they can see how environmental conditions could affect their hair.

The data means the app has 144 different hair codes and 24 hair personality types that it uses to make a recommendation. P&G owns brands including Herbal Essences, Pantene and Old Spice.

“We found that people tribe around their hair types,” says Kelly Vanasse, chief communications officer for P&G Beauty, Grooming & Influencer Marketing. “This taps into the social zeitgeist, which is where people are living these days.”

Weak October sales put grocers under pressure ahead of Christmas

Supermarket sales growth slowed in October to 1.5%, down from 1.9% in the previous four weeks and 3.1% in the same period a year ago, putting grocers under pressure ahead of the crucial Christmas shopping period. The figures, from Nielsen, suggest shoppers are being as cautious in grocery spend as they are in other sectors including retail and leisure.

Asda was the fastest growing of the big four grocers over the 12 weeks to the 3 November, with sales up 2.5%, followed by Morrisons on 1.2%, Tesco on 0.3% and Sainsbury’s, where sales were down 0.6%. Aldi remains the fastest growing overall and its sales increased 12.2%, followed by Lidl on 6.5% and Iceland on 5.7%.

The figures suggest Christmas advertising and promotions will be critical this Christmas. Alcohol offers, which are typically first to be introduced in the pre-Christmas period, are already coming through with sales of beers, wines and spirits up 4.9% and sparkling wines seeing sales rise 8% in the week ending 3 November.

Mike Watkins, Nielsen’s UK head of retailer insight, says: “Both in-store promotions and media campaigns are more crucial than ever for the supermarkets this Christmas, to entice shoppers into their stores and ramp up consumer spending.

“With weaker than expected growth in October, the industry is under pressure to get shoppers into the habit of spending more over the next six weeks by showcasing what’s new and different in store. We expect to see some inspiring and distinctive campaigns designed to drive sales as retailers will be focused on pulling consumers in over the festive period.”

Diageo sells 19 brands to focus on core premium business

Diageo is selling a portfolio of 19 brands to US company Sazerac for $550m (£427m) as it looks to increase the focus on its core premium brands. The list of brands being sold includes Seagram’s whisky, Romana sambuca and Booth’s gin.

Diageo chief executive Ivan Menezes says: “The disposal of these brands enables us to have even greater focus on the faster-growing premium and above brands in the US spirits portfolio.”

The deal is subject to approval by regulators and is expected to complete in early 2019. Sazerac is a family-owned distiller with operation in 10 US states, as well as the UK, Ireland, France, Canada, Australia and India.

Monday, 12 November

Alibaba’s Singles Day smashes records

Alibaba’s annual Singles Day global shopping extravaganza reached a new record this year, making $1bn (£774m) in sales in 85 seconds and just under $10bn in the first hour of the 24-hour period.

Customers spent $30.8bn overall, a 27% increase on the previous year, with e-commerce sales beating world records.

“Today we witnessed the strength and rise of China’s consumption economy and consumers’ continued pursuit to upgrade their everyday lifestyles,” says Daniel Zhang, CEO of Alibaba Group.

“Participation from the entire Alibaba ecosystem enabled our brand and merchant partners to engage with consumers like never before. Looking ahead, Alibaba will continue to lead the evolution towards the future digital economy and lifestyle.”

However, the 27% is the lowest increase Singles Day has seen since it began in 2009, with some analysts predicting there will be a continued slowdown in growth.

“It is possible that there will be a slowdown in growth for Singles Day sales, given that they have had exponential growth in the past,” says Xiaofeng Wang, an analyst with research firm Forrester.

“As the festival matures and becomes more established, we can expect the growth rate to slow down.”

High street jobs in decline

More than 85,000 jobs in retail were lost in the first nine months of the year as a result of almost 1,000 businesses going into administration – the highest figure in five years.

Meanwhile, the number of businesses that went into insolvency was up 73% year on year.

“We are seeing more competition and higher costs on the high street, coupled with a long-term decline in footfall as consumers shop online,” says Rachel Lund, head of insights at the British Retail Consortium.

“This is making conditions tough for retailers, so it is no surprise that job numbers have fallen alongside a rise in CVAs and insolvencies. The government should take immediate action to halt the rising cost of business rates.”

According to separate data from PwC, 2,692 shops shut across the UK in the first half of 2018, while only 1,569 new stores opened.

VW to launch Tesla rival

Volkswagen is reportedly planning to launch an entry-level electric car within the next two years.

At around $21,000 (£22,836), the ‘MEB entry’ model would be more affordable than Tesla’s cheapest model, with VW expecting to sell around 200,000 every year.

According to a source close to the plans, VW hopes to protect German jobs by converting three factories.

While VW has declined to comment, its supervisory board are due to meet on Friday to vote on whether the plans for electrification should be accelerated.

Tesco launches own-brand baby food

Tesco has launched its own-brand baby food, with 15 new products including pouches, ready meal trays and rice cakes to be available in over 700 stores.

All products within the range will contain no added salt or sugar, no artificial colours or flavouring and will have at least 45% vegetables in all of the meals.

“Our recipes have been developed with experts and nutritionists to help babies on their journey of discovering exciting new tastes and textures. Our organic range of pouches, trays and snacking encourages the experience, enjoyment and exploration of food with health, taste and quality at the heart of every recipe,” says Sinead Bell, category director for baby, beauty and toiletries at Tesco.

“We have packed in as much veg as possible and there is no added salt or sugar in any of our products. It’s our way of helping even our youngest customers lead healthier lives and supporting parents in their goal to raise healthy eaters.”

Tesco has also launched a range of nappies specifically designed to cater for children whose disability means they continue to need nappies and have outgrown regular sizes.

It claims it is the first supermarket to launch its own range.

Daily Mail owner poised to buy i newspaper

DMGT, the publisher of the Daily Mail, is reportedly in talks to buy Johnston Press’s i newspaper.

Johnston Press, which is one of the largest local and regional publishers in the UK, put the i up for sale in October amid financial pressures and a challenging advertising environment.

The struggling publisher bought the eight-year-old newspaper from the Independent in 2016 for £24m. While it is one of JP’s biggest titles, the publishing business has a £220m bond due for repayment next year.

JP has refused to comment on the speculation but says the sales process is ongoing.