The strangely robust world of TV advertising

Jonfine Jon Fine is one of the aces of contemporary journalism. He writes the Medic Centric column for BusinessWeek. He grasps culture.  He grasps commerce.  He has made himself a careful student on the extraordinary changes now upon us.  

In an article in the summer, he observed an interesting paradox in the TV biz.  Viewership continues to fall, but ad dollars remain in place.  

A digitized world has crushed the music industry and is now crushing just about every other medium, too. But at least when it comes to the hearts and dollars of advertisers, TV remains the tallest tree in the forest. Like a semi-bright child fixated on one idea, I wandered the mid-May upfronts week and buttonholed everyone I could with variations on a single question: When do falling ratings finally make advertisers flee? That is, at what point does all of this—insert a gesture toward a glitzy onstage spectacle or a crowded, hangar-sized party space—end? The unanimous answer: Some day. Just not now. 

We might explain this paradox as the work of the dead hand of competence.  TV advertising is what advertiser knew how to do.  It's what big brands have always done.  Carry on fiddling. 

But this seems to be unlikely.  Every big agency has a new media play.  Every big brand has experimented by this time with new media properties.  Everyone has a clear grasp of the alternatives to TV.

The other more interesting possibility is that, in a fragmented universe, TV advertising remains the "big tent," even when filled with dramatically fewer people.  There has to be something wrong with the economics of spending the same number of ad dollars on fewer people, but perhaps any majority position is better than having to pursue those minority audiences.  (To use a 80s metaphor, all ships have dropped with the tide, but the biggest ships are still the biggest ships, and there is something unproportional about this advantage.)

And this suggests that the way we calculate value is beginning to change. 

References

Fine, Jon. 2008. Don't Touch That Dial. Businessweek. June 2, 2008, p. 90. 

9 thoughts on “The strangely robust world of TV advertising”

  1. Are TV ad dollars staying solid across the board, or just up for key, ‘must see, can’t Tivo’ events (Super Bowl, Oscars, etc.)?

    I think the big TV ad play is still worth making *because* of digital, not in spite of it. Now I can run that expensive ad during the Super Bowl, but if I do it right, and for an incremental spend, I can leverage it across multiple platforms. So now that 2 million dollars not only got me the Super Bowl Sunday audience, but also tomorrow’s (and the next day, and the next day)web audience. Now my cpm is going down dramitically.

    I think a mediocre Super Bowl ad, say something from Budweiser, still gets way more watercooler talk in most places in the U.S. than Judson Laipply’s Evolution of Dance YouTube video. If Bud just launched a YouTube ad, cutting out the Super Bowl TV spot, I think they fail.

    Now, would I pay crazy prices to advertise during “TMZ” or “Are You Smarter than a Fifth Grader?” No, because I am.

    American’s still love *events* and still love to feel a sense of being part of something bigger than themselves. Those opportunities will always command big dollars on TV.

  2. TV media is still really killing itself, IMO, due to the number of ad units they are trying to cram into their programming. So, not only are their fewer viewers, but those viewers are forced to watch more commercial interruptions. Sure, we all DVR and speed through them, but the “experience” is becoming less and less acceptable. The real tragedy, I think is that sooner (I bet) rather than later, the broadcast and cable media spending is going to collapse due to these practices. And unfortunately, this same broadcast thinking is trying to be migrated to online video with pre-, post- and intra- inserted ads to monetize the web offerings.

    The online culture is willing to deal with a certain level of interruptions (read: advertisements) however, realize that most of those watching content online did so to escape the BS paradigm that is the broadcast and cable network delivery.

  3. Very rational post Grant,

    Possibly this relates to the average age of senior directors who sign-off the advertising budget?

    If the average age of senior directors is above 55 or 60 then their exposure to “new media” is likely to be limited. They view it as the sort of thing their grandchildren do. It would take a lot of courage for a CEO to admit he/she doesn’t understand what the agency is getting at (even after the third or fourth presentation).

    Unfortunately many corporate decision-makers turn down campaigns on personal whims (“I don’t like it” therefore no-one else will).

    And on the agency side, there is a lot of allure in doing TV campaigns, even if they don’t perform very well.

  4. If I had to take a guess on this (as others have) I’d say it’s just because it’s easier (and cheaper) for the agency.

    At the end of the day, the problem with agencies and clients hasn’t changed as much as media has: Agencies are work for hire and therefore subject to a different set of metrics than clients. Those metrics, for better or worse, are still about reach. Getting any significant reach on the web takes a lot more work.

    What’s more, I think we’re seeing the same thing in the online display advertising market. While most in the industry recognize the inadequacies, it’s still the easiest way to guarantee your message gets in front of a whole bunch of people on the web (whether or not they look at it, of course, is a whole other thing).

  5. I think Noah may have hit on a key motivator in his last line:

    “whether or not they look at it, of course, is a whole other thing.”

    Perhaps it’s the whole thing. If I’m going to be measured on my media spend, I’d much rather be measured on something that no one can actually measure.

    Judson Laipply’s Evolution of Dance 6 minute YouTube video has 105,897,649 views to date. That’s proven engagement. How many engaged views did Sales Genie get for their investment in last year’s Super Bowl ad? No one really knows.

  6. Hi Grant. I couldn’t see an email address on your blog so I’ve just posted in your comments. I hope you don’t mind. I have heard you on design matters and saw you at designthinkers last year. Big fan and I subscribe to your RSS… I’m about to embark on teaching HS art in Feb.. I’ve been reading this paper and thought it might be of interest to you. Keep up the great blog!

    http://digitalyouth.ischool.berkeley.edu/report

    Tom

  7. Three hypotheses:

    1. Signalling–A web-only advertising presence could represent a fly-by-night outfit with little skin in the game. They don’t need repeat customers to prosper and so can profitably underperform with anyone who does business with them. On the other hand, a TV ad (preferably an expensive one) both requires more up-front expenditure and is only rational if it generates a certain amount of repeat customers. Hence, a screw-the-customer firm has a smaller incentive to go on TV.

    2. Increased marginal value of aggregation (this is like Grant’s big tent argument). In a fragmented world, there is an extra premium paid for a bigger audience (for certain types of products, e.g. beer or cars). Thus TV still globs together bigger groups of potential buyers at once than alternatives.

    3. Better TV demographic information and more-focused shows. Maybe the audience for Gossip Girl contains a higher percentage of advertisers’ targets relative to past TV, which partly compensates for the smaller audience. This effect could prop up ad rates for a while.

  8. Your take on this issue is right on the money, Grant. Digital advocates are doing themselves a disservice by pitching against television. I’ve seen Web numbers (including conversions) soar as a direct result of TV advertising.

  9. Great post, Grant.

    I think there’s a fundamental at work here that we can’t forget: Marketing in the industrial part of the economy – the part where we make stuff – still depends on scale. That notion extends to media, where the counterpart of manufacturing scale is reach… how many passive consumers you can spray with your message determines how many will actually react to it. Even if the ‘big tent’ is getting smaller, it’s still the biggest tent we’ve got, and predictably the economics of this are making reach more expensive because there’s less of it to go around. That’s why the dollars stay in place. And Google aside, the fact is that while the internet might be good at helping people find things, it’s still pretty lousy at helping people want things.

    The person who figures out how to engage a passive consumer in large numbers and make them want something they weren’t thinking about thirty seconds ago – economically – will be rich beyond imagining. In the meantime, this is what you get.

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