Ad spend under pressure as big brands pull back on TV

UK advertising saw its slowest growth for almost four years in the first quarter as TV spend dropped 6.2%.

UK advertising spend grew at its slowest rate for almost four years in the first quarter of 2017, as a notable drop in TV spend hit the market.

The quarterly survey by the Advertising Association (AA) and Warc found that UK advertising grew just 1.3% year on year in the first quarter of 2017 to reach £5.4bn. TV advertising took a surprising hit, dropping 6.2%, its first fall since 2009.

“The latest data show that large retailers – particularly supermarkets – and major food brands reined in their TV spending by 25% during the first three months of 2017, instead committing to cutting prices on the shelves as household expenditure wanes,” says James McDonald, senior data analyst at Warc.

READ MORE: Channel 4 admits TV ad market is in recession as big brands pull back

The decline in TV ad spend was not enough to offset the growth seen in internet ad spend, which was up 10.1% and accounted for almost all the growth in the industry.

The report found that digital formats performed well across the board, up 25.4% for national news brands, 8% for radio, 7.2% for broadcaster video-on-demand and 27.6% for out-of-home. Cinema also grew 27.6% year on year, as brands including River Island and YouTube used the medium.

Mobile formats saw the fastest growth, at 36.2%, while search continue to hoover up spend. The report estimates that £1 in every £4 spent on advertising now goes on search.

Despite the slowing growth, the outlook for the advertising industry remains positive. AA/Warc expects spend to increase by 2% this year (a 0.5 percentage point downgrade from previous estimates), with that growth set to accelerate to 2.6% in 2018 driven by the men’s football World Cup and a likely rise in certainty around the terms of Brexit. TV ad spend is also expected to return to growth

“As business sentiment suffers, it’s no surprise to see ad spend come under pressure – but the market overall remains resilient,” says Stephen Woodford, chief executive at the AA.

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