Television advertising remains resilient and rocky
In the first half of 2009, TV advertising spend fell 16.1 per cent, year on year, to £1.6 billion. This plummet was accompanied by a major inflection point: online advertising overtook spend on TV.
The IAB (Interactive Advertising Bureau) said: “marketers still recognise the value, accountability and measurability of online advertising”.1 New Media Age called it “a huge milestone”.
The BBC’s media correspondent, commenting on the challenges that ITV was going through, said: “the internet has broken the traditional TV advertising model”.2
Since 2009, online advertising revenue – of all types, including search and display – has continued to grow, reaching £10.3 billion in 2016, double the revenues for TV.3
This growth has not, however, come at TV’s expense: while TV ad revenues have fluctuated with the economic cycle, the scale of revenues has remained robust. It does not appear to be in structural decline.
Indeed, in the second half of 2009, TV ad revenues were already on the mend. For the full year, revenue ended at £4.3 billion, an 11.8 per cent year-on-year fall.4 Since then TV has generated between £4.3 billion and £5.1 billion every year.5 Between 2012 and 2015, TV ad revenue grew every year, from a base of £4.6 billion.6
This contrasts with the outcome for the publishing sector. Between 2009 and 2016, ad revenues for newspapers fell from £4.77 billion to under £1.7 billion.7 For magazines, the fall was equally steep, from £1.33 billion to £0.59 billion.8 In the UK, as has been the case in other markets, online advertising has grown at the expense of publishing, with online platforms being particularly successful among small and medium-sized companies that previously bought print ads.
TV’s inherent resilience as an ad medium is due to its unique combination of qualities. No other platform is likely to emulate these in the medium term.
Television can aggregate simultaneous audiences of millions and deliver stories which drive the national conversation. These audiences will decline, but TV will still likely be delivering multiple multi-million simultaneous audiences every day for the next five years.
TV should continue to offer the best environment for brand-building advertising, worth up to a reputed £500,000 per 30-second half-time slot in the World Cup semi-final.9 It will typically be consumed in the living room, on a large screen and with good quality audio. Programming will continue to catalyse gatherings of family and friends.10 Polished, 30-second audiovisual advertising delivered into this environment should help build and maintain brands.
TV will also be perceived as safe, relative to other platforms: this will matter to viewers and to advertisers. Viewers will value the relative wholesomeness of the content: a child’s cartoon distributed via a broadcaster will be a child’s cartoon. Online, errant content might be delivered, due to glitches in the algorithm.11 Advertisers will value TV’s audience measurement.12 Advertising planners, tasked with building a brand, will continue to bet on TV to attain this objective.
At the revenue level, there are two known unknowns: economic and regulatory uncertainty. The performance of the UK economy is likely to depend on the outcome of negotiations with the EU.13 A ban on pre-9pm junk food advertising may reduce ad spend by £200 million.14
But there is also scope for upside, even if minutes of TV viewing continue to decline, and commercial impressions fall. The TV industry could, arguably, do a better job of selling itself, winning a greater share of advertising budgets as a result; it could exploit its first party data more fully, enabling it to compete more directly with online ads; it could market its trove of over 55-year olds viewers which include some of the wealthiest people in the UK.
Historically broadcasters have competed with each other. The instinct for broadcasters to continue sparring with each other remains strong, based on decades of competition. This muscle memory may have slowed TV’s response to the growing portfolio of new types of video ad, each eager to capture TV ad spend. Instagram TV, launched in June this year, supports long-form content of up to an hour.
Traditional television, 14 years after Facebook’s launch, and 13 years after YouTube’s, has started to respond. In February this year, ITV, Channel 4 and Sky held their inaugural Big TV Festival, targeted at younger people working in TV, to make them aware of the merits of TV. Ahead of the event, Jonathan Allan of Channel 4, noted that it was important to “speak more with one voice”.15
A core message TV should proclaim with vigour is video formats are highly variable, and variably valuable as a result. Every type of connected screen has differing attributes. A TV set is large and immobile; a smartphone is portable but small. TV screens are great for gatherings. A smartphone is optimised for short-form content, and a single viewer. An ad viewed on a TV is likely to be prominent, and be accompanied by sound. The same ad on a smartphone may be ignored, and the audio may be off. Mobile ads do work, but in a different way to TV.
Exploiting first party data
More viewing is moving online. This is an opportunity for broadcasters. Over the past decade Channel 4, the BBC and ITV have each accumulated tens of millions of user profiles via registrations to All 4, iPlayer and ITV Hub. Over the next decade the number of these profiles may well swell further, with each person, rather than one person per household, creating their individual profile, and signing in every time they watch content on-demand.
When these people are watching via a connected device, it will become possible to measure audience behaviour more accurately, delivering more precise measurement that advertisers have come to expect. Delivering targeted advertising campaigns would also become more technically viable.
Targeted campaigns have been available via Sky’s AdSmart for years. AdSmart revenues rose 29 per cent in the year to June 2018. AdSmart runs on Sky Media-represented channels on Sky and Virgin Media, and enables advertisements to be targeted to specific households, based on multiple factors, ranging from location to lifestyle.16
Advertising and the over 50s
TV could make more of a virtue of its core audience – the over 50s, while still shouting about the strength of its reach among younger audiences relative to other media. The 55-74 year old cohort has over half of the UK’s £12.8 trillion in wealth; 16-34 year olds have 3.3 per cent.17
Over the past five years viewing of traditional TV has changed little among older viewers but fallen sharply among younger viewers. In the UK, people aged 55 and older constitute about a third of the population, but half of all viewing volume.
Historically, the 50+ audience was less interesting for advertisers on the basis that buying behaviours and brand preferences ossified in their 20s. But today’s 50-year olds are a far more diverse group than a generation back; they are not, as a group, anticipating retiring in their 60s.
They now constitute a significant part of the dating community: one in four singles aged 50-64 is actively dating, generating over £664 million to the UK economy every year.18 The ‘silver singles’ spend more per date (£39) than the average (£31), often because they are wealthier. The over 50s are increasing their spend on holidays, while the young are cutting back. Over the five years to 2016, spend on travel among the over 50s increased by 23 per cent but fell 5 per cent among the under 50s.19
Television advertising is inherently resilient. As a medium it is in a class of its own. The more advertisers are aware of this, the greater the demand that should result. It will always be subject to the economic cycle and it may get afflicted by punitive regulations. Viewing patterns are changing, reducing time spent watching live TV.
But despite the challenges, TV has many virtues, which the industry needs to sell and defend.
1 Online advertising 'overtakes TV', BBC, 30 September 2009: http://news.bbc.co.uk/1/hi/business/8280557.stm
2 Troubled ITV set to slash costs, BBC, 4 March 2009: http://news.bbc.co.uk/1/hi/entertainment/7922664.stm
3 For more information see Communication Market report 2017 - Television and audio-visual content section (figure 2.8), Ofcom, 3 August 2017: https://www.ofcom.org.uk/__data/4assets/pdf_file/0016/105442/uk-television-audio-visual.pdf
9 Why brands will spend £500k a spot during England's historic world cup semi on ITV, The Drum, 10 July 2018: https://www.thedrum.com/news/2018/07/10/why-brands-will-spend-500k-spot-during-englands-historic-world-cup-semi-itv
10 The secrets to a happy family? Watch TV together, sit around the table for Sunday lunch... and make sure you live near a pub, The Daily Mail, 11 September 2015: http://www.dailymail.co.uk/news/article-3230251/The-secret-happy-family-Watch-TV-together.html
11 The disturbing YouTube videos that are tricking children, BBC, 27 March 2017: https://www.bbc.co.uk/news/blogs-trending-39381889
12 TV body Barb outlines hurdles Facebook & Google need to overcome to win accreditation, The Drum, 8 April 2018: https://www.thedrum.com/news/2018/04/08/tv-body-barb-outlines-hurdles-facebook-google-need-overcome-win-accreditation
13 The UK economy since the Brexit vote — in 5 charts, The Financial Times, 31 July 2018:https://www.ft.com/content/cf51e840-7147-11e7-93ff-99f383b09ff9
14 Ban on junk food TV ads may backfire, says Channel 4 boss, The Guardian, 26 June 2018: https://www.theguardian.com/society/2018/jun/26/ban-on-junk-food-tv-ads-may-backfire-says-channel-4-boss
15 ITV, Channel 4 and Sky unite to champion TV advertising in face of online threat, Campaign, 7 February 2018: https://www.campaignlive.co.uk/article/itv-channel-4-sky-unite-champion-tv-advertising-face-online-threat/1456482
16 Sky reveals 29% annual rise in AdSmart revenues, Campaign, 26 July 2018: https://www.campaignlive.co.uk/article/sky-reveals-29-annual-rise-adsmart-revenues/1488896 ; for more information on Sky Adsmart see About Sky AdSmart, Sky, as accessed on 29 August 2018: https://www.skyadsmart.co.uk/about-skyadsmart/
17 Distribution of aggregate household total wealth by age and wealth component, Great Britain, July 2012 to June 2016, ONS, 6 March 2018: https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/adhocs/008149distributionofaggregatehouseholdtotalwealthbyageandwealthcomponentgreatbritainjuly2012tojune2016
18 Over-50s singles in UK spend £644m looking for love every year, Global Dating Insights, 16 October 2017: https://globaldatinginsights.com/2017/10/16/over-50s-uk-singles-spend-644m-looking-for-love-every-year/
19 Over-50s spend more on holidays, the young travel less, Travel Weekly, 27 September 2016: http://www.travelweekly.co.uk/articles/63246/over-50s-spend-more-on-holidays-the-young-travel-less
Summary: Television advertising is inherently resilient: as a medium it is in a class of its own. The more advertisers are aware of this, the greater the demand that should result. Viewing patterns are changing, reducing time spent watching live TV, but TV advertising still has many strengths, which the industry needs to sell and defend. In this podcast the news and media journalist, Ray Snoddy OBE talks to Paul Lee, Deloitte’s Global Head of TMT Research and Helen Rees, Director, Deloitte MCS, about how TV advertisers can navigate a time of economic and regulatory uncertainty to remain successful.