TV’s tipping point
- 14 September 2015
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As TV advertising in the US faces decline, what does the future hold – and what can TV companies do to respond?
Traditional TV advertising is on the slide, while digital spending accelerates. With US TV advertising spend recording a decline again in the second quarter of 2015, at the same time as spending on digital media continues its inexorable rise, does this mark a tipping point being reached in the ascendancy of digital advertising?
A recent report from global management consulting and advisory firm, Bain & Company, on marketing trends – will the ad revolution be televised? – suggests that TV advertising is indeed facing a critical period of transition. While US TV advertising still secures the largest share of marketing budgets, at around US$66bn in 2014, online advertising is growing quickly. At US$49.5bn in 2014, it’s catching up fast.
In fact, the most recent second quarter advertising figures from advertising data services company Standard Media Index (SMI) indicated a 5% slump in overall TV advertising year-on-year, with cable TV spend falling by 3% and broadcast TV spend by 10%. Meanwhile, year-on-year digital ad spend in the US grew by 21%.
Bain & Company’s report had some sobering revelations for TV executives. It found that marketers now say television performs worse than digital in the areas they care most about – including targeting, measurement and engagement. Marketers also believe digital advertising is increasingly working on the audience reach level.
The research found that the appeal of TV advertising for US marketers was in decline; while 57% of marketers currently rank TV among their top five channels for advertising spending, looking three years ahead only 50% see TV in their top five.
“Traditional TV and digital are now battling for ad dollars on a surprisingly even playing field,” said Charlie Kim, who heads Bain's media practice in the Americas and is co-author of the report. “Advertisers view digital platforms as a substitute, rather than a complement, to traditional TV, which should worry TV executives, especially since live TV viewership is also in a steady freefall.”
Justin Taylor, MD of Teads UK, the UK arm of global digital video advertising company, says: “The fall in TV ad spend is a symptom of a much bigger shift in consumer behaviour. The television is no longer the main attention draw, instead eyeballs are migrating online. The ad spend is simply following this migration, with marketers realising that, if they want to get the most of out their creative, it must reach consumers’ phones, tablets and laptops.”
Andreas Schroeter, COO and cofounder at wywy, a leading TV ad syncing technology company, believes this trend indicates a continuous shift away from siloed budgets for TV and online video towards overall, combined budgets: “TV still has an unparalleled reach, and we are seeing the first technologies emerging that better target and track the traditional linear TV ads, such as addressable TV ads and TV analytics. In the medium term, it will matter less to the advertiser which channel is used – be it linear TV, VOD, or online video.”
Schroeter believes this transition reflects a switch to a better understanding of what advertisers receive for their ad spend: “Digital media measures everything – that’s what makes it so appealing to brands. Although TV advertising is very effective, brands need large budgets and are limited to targeting audiences based on a TV panel. New technologies such as programmatic TV and emerging TV attribution models will allow for more granular targeted buys with smaller budgets.”
“Collaboration across the entire TV ecosystem is going to be the game changer for traditional TV advertising from this point forward,” said Danny Hong, the report's co-author. “There is no longer a strategic advantage to going it alone. Any short-term friction will be vastly outweighed by big returns in the long term, and a greater competitive advantage on a par with, or ahead of, digital.”
So what does this mean for marketers and advertisers? Schroeter from wywy believes it is mainly a shift in mindset. “Today’s consumer switches between screens, online and offline content, and does not differentiate between marketing channels. Today’s marketing channel silos will need to make room for integrated teams, and new technologies will help with cross-channel coordination and tracking.”
Television will remain an important part of the media mix, as it continues to draw massive audiences. However, the TV industry will need to embrace additional measurement metrics to show its value, particularly as part of cross-channel campaigns – and how it responds will help determine the longer-term picture.
Taylor from Teads UK concludes: “Just because TV ad spend is falling, it doesn’t mean TV is going to disappear any time soon. Instead we are seeing a much more nuanced, cross device, picture. Increasingly, marketers are using TV as a tool to connect consumers with their digital marketing efforts. The future is in marketing campaigns that reach users and create a brand experience across the family of user screens and devices. That 100% still includes TV.”
What should marketers look out for?
The Bain report suggests that the US TV industry could lose out on US$10-20bn if it fails to meet the digital challenge, and the industry is responding with new partnerships, data platforms and targeting tools to hit the marketers’ sweet spot that digital addresses. It also lists four areas where the industry can transform. Marketers should look out for these changes to see which companies are at the cutting edge:
- Anticipate and deliver against marketers’ rapidly changing needs so that TV can adapt to changing trends and behaviour
- Generate proprietary audience insights to improve address-ability of current TV ad inventory – effectively improving data analysis of viewers to deliver precise targeting for advertisers
- Invest now in the next-generation ad platforms, as a way to stay relevant as a primary provider to the marketing ecosystem
- Collaborate with natural allies and traditional adversaries, such as rival content owners and distributors
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