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Does Advertising Still Need Television?

Does Advertising Still Need Television?

Does Advertising Still Need Television?

The watchword today in advertising is personalization—using digital media to deliver highly targeted ads. So why is television's share of the global advertising market actually rising? Because TV is still better than the rest at engaging consumers.

Even as TV habits evolve, ratings in most countries are steady and ad rates are as hot as ever, particularly for the biggest shows. Contrary to the fears of many, the Internet—and social media, in particular—hasn't yet cannibalized TV advertising. In fact, it may even be improving the TV experience for viewers and advertisers alike.

While so many technology evangelists proclaim that personalized advertising is the way forward and that traditional mass media has no future, for now television remains advertising's most appealing medium.

TV: Still the Standard

There are many valid reasons marketers are so excited about the potential of personalized advertising. The ability to pinpoint target audiences is one. Using data gathered from Facebook profiles, a sports team can target young men while a fashion magazine finds young women readers, and a retailer can send targeted coupons to mobile Internet users in a specific area.

Internet advertisement is also affordable, especially in comparison to TV advertising. An online video can be quite effective, particularly when you consider that the ad space costs about $30 per thousand impressions. Compare that to hundreds of thousands of dollars for 30 seconds on the most popular prime-time network television shows. Additionally, Internet and mobile ads have a sense of immediacy—users can respond immediately by clicking on a link to an online store.

At the same time, there are plenty of reasons to doubt TV's future as an advertising behemoth. Consumers' viewing habits are evolving rapidly. "Non-linear" television services, including digital video recorders (DVRs) and on-demand websites such as Hulu and Netflix, are growing increasingly popular, accounting for 12 percent of total television viewing worldwide in the third quarter of 2011 (see sidebar: The Fate for "Thematic" Channels). In 2011, the number of homes with a television in the United States dropped for the first time in two decades.

Still, TV's share of the overall market remains strong—it rose 3 percent between 2006 and 2010 (see figure 1). Meanwhile, the gains in Internet advertising have come mostly at the expense of print. If digital advertising is the wave of the future, television is still the leader of the present.

Why is that? Quite simply, the power of television—the moving image on a large screen, high-quality video and audio, the ability to stimulate emotion and engagement—is hard to beat. Amid a constant barrage of advertising messages, TV still offers a brand the way to stand out: an exclusive spot in the middle of a TV program that draws millions of relaxed viewers waiting to be entertained. A banner ad across a webpage or a text-based ad accompanying a Google search can't match that. And the spread of high-definition televisions has made the in-home viewing experience that much better.

The medium is only part of why TV advertising remains so attractive. Few websites can offer the large, engaged, national audiences of leading television programs. In some countries, the most popular television programs, such as the Super Bowl in the United States, reach more than 30 percent of the population, giving advertisers a prime opportunity to build or revitalize their brands. Even as personalized media takes hold, many people still enjoy watching TV together with family and friends. For advertisers seeking to build or revitalize brands quickly, what better way to do that than to tap into the 20 million Americans watching American Idol or the 10 million U.K. viewers tuning into The X Factor?

Television's share of the advertising market gre 3 percent between 2006 and 2010

In many countries, ad space for the most watched TV programs is more expensive today than it was a decade ago. In France, TF1, Europe's number one channel, has created "FIRST" screens—best-of-the-best advertising slots during high-quality programs with large audiences,sold at a net price, regardless of the advertiser or the volumes it purchases. Tellingly, even Internet specialists spend much of their marketing budgets on television; in 2011, Google spent millions on U.S. TV ads.1

A study of the French market by Havas Media and analytics firm Concentric found that paid advertising generates 87 percent of "earned media"—that is, the media coverage you don't pay for, such as word-of-mouth, blogs, Facebook posts, and tweets. Within that total, TV is responsible for 53 percent, and online advertising only 13 percent.

Combining Old and New

While overall traditional TV audiences remain strong and relatively steady, and TV advertising spending remains strong, part of that is due to the fact that older people are watching more TV than ever. More viewers, especially younger ones, are watching shows on the Internet, through their DVRs, and via mobile phone. As viewing habits change, advertisers must take note and adapt.

Contrary to the fears of many, the Internet hasn't yet cannibalized TV advertising. In fact, it may even be enhancing the TV experience for viewers and advertisers alike.

These changes don't necessarily mean the death of TV; rather, they point to the need for traditional broadcasters and their advertisers to embrace interactive media to support traditional TV. The rise of "dual-screen viewers"—watching TV while simultaneously using a computer or smartphone—is in many ways enhancing the TV experience for both viewers and advertisers alike. For example, in the United Kingdom, 48 percent of "tech-savvy" consumers (those who own and are medium-to-heavy users of digital TV and broadband Internet) watch television while using the Internet, according to a survey of 3,011 people by Thinkbox and the Internet Advertising Bureau. These viewers are 50 percent more likely to buy or use an advertised product when they use TV and the Internet together.

These changes are leading to the rise of what some are calling "social TV," where viewers connect via social media to "share" the TV experience. Leading television broadcasters and advertisers are already tapping into this, using websites, Facebook and Twitter, smartphone apps, and other interactive services to connect with viewers before, during, and after programming. Compelling television commercials can lead dual-screen viewers to look up information on their computer or smartphone—and even spur them to make purchases. In essence, television and interactive advertising can complement and reinforce each other. Nielsen recently reported that increased social media "buzz" surrounding a show can lead to an increase in ratings, especially for season premieres and finales.2

Many of today's most effective campaigns combine use TV commercials to build the brand and create buzz, and the Internet to allow consumers to follow up and make purchases. Kraft Foods combined TV and online advertising in promoting its chocolate brand Milka in Poland. Television commercials directed Poles to an online campaign to vote on how funds to preserve wildlife in Poland's Tatra Mountains should be spent. The campaign attracted more than 600,000 online votes. Polish broadcaster TVN said that 71 percent of the Polish consumers it surveyed said they remembered the campaign. Milka, which uses mountainous imagery in its branding, saw its market share in Poland rise almost 3 percent in 2010 to 17.8 percent.

Paid advertising generates the vast majority of "earned media"—that is, the media coverage you don't pay for, such as word-of-mouth, blogs, Facebook posts, and tweets.

TV Stays Strong

Yes, personalized and mobile advertising has a major role to play, but the big-budget television commercial still reigns supreme. For brands, television is evolving from a role in which ads merely seek to sell a product to a "trailer to engage" model in which ads tease a story that consumers can continue following in other touch points. Brands need television as much as ever, both to build awareness and to tap into people's emotions. TV's large screens, high-quality audio, and engaging content still reach consumers in a way that mobile phones and personal computers can't.

 

1A.T. Kearney's Tim Bradshaw, "Google turns to television to lure consumers," The Globe and Mail, 29 December 2011. http://www.theglobeandmail.com/news/technology/tech-news/google-turns-to-television-to-lure-consumers/article2285371/
2Simon Dumenco, "Believe the Hype? Four Things Social TV Can Actually Do," Advertising Age, 13 April 2012. http://adage.com/article/the-media-guy/hype-things-social-tv/234134/

July 2012
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