The Pie Shrinks, But TV Hangs On Strong

Another week, another market downturn. Economic news continues to bring the doom and gloom, and so does the outlook for the ad industry overall. But even as consumers and marketers keep tightening their belts, TV ad spending remains surprisingly buoyant. 

You might've read the excellent piece in the Wall Street Journal last week about the TV advertising paradox. (If you didn't, do.) Fewer people are watching television, the authors pointed out, and yet brands are spending more than ever to advertise on television.

As Jon Lafayette put it in Broadcasting & Cable back in July, "While some businesses adjust their marketing plans, TV appears to be something they can't live without."  

This sentiment was echoed by CBS's Les Moonves at an industry conference last week, where he highlighted the strength of his network's ad-revenue outlook. "We don't see a slowdown," he said, and "people who bought (ads) in the upfront are increasing their orders."  

So what's up? Why all the love for TV? Three reasons: 

1.    It's got reach. Chris Anderson's long tail might work for some folks (especially online), but there aren't too many media outlets that can deliver viewership in the millions these days. When you are looking for scale, you've got to go for the telly.

2.     It's cheap. Relatively speaking, TV spots are a great value: A mere $14.50 per thousand households for network TV last season, and only $6 for cable, as reported in the WSJ. (The average cost per thousand times a display ad was served on a finance-related site during the first half of the year was $19 --  $17.50 for automotive sites, according to SQAD, Inc.) 

3.     It works. Leveraging data enables television ads to be delivered specifically to audiences already committed to a given brand or product category; they're primed to purchase. Paired with the enhanced brand recall that television delivers, it makes for an advertising homerun.

That might explain why, despite flagging growth in ad spending overall, six of the 10 fastest-growing advertising categories - mostly in financial services - hit five-year spending highs in the first half of 2011 (in terms of percentage-gain increases on their total ad spend).  

But the economy's still on the brink of double-dipping into recession, and the ad pie is forecast to keep shrinking. Just look at the stock prices of the big ad conglomerates -- WPP, IPG, Omnicom. My back-of-the-napkin number-crunching shows a sector that's down 25% since August's credit crisis. Even if TV budgets stay on a relatively even keel, it's obvious we're in for rocky times ahead. 

Shades of 2008? I don't think so. After all, now we've got tools at our disposal that we didn't have three years ago. At the time of the last market swoon, the power of set-top box and consumer purchase data was just being unleashed. Three years later, companies like Invidi, Black Arrow, Rentrak and Simulmedia and TRA are helping advertisers and networks put that data to good use to make media budgets work harder than ever.   

Thanks to advanced advertising solutions that didn't exist in 2008, there's a level of accountability and confidence in television advertising that buyers and sellers didn't always have. Combine that with unduplicated reach, value, effectiveness, and programming, and you can see why there really is no business like our (TV) show business.

Tags: television, tv
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