Two Decimal Points: The Difference In Effectiveness Between TV And Online Ads

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I've finally found a way to quantify the relative effectiveness of TV and online display advertising. It's two decimal points. That's how much more effective TV ads are, relative to online display ads on an impression basis.

This conclusion is certain to be controversial, so I will tell you how I arrived at it. At least 25 times over the past few months, I have found myself presenting charts to either clients or partners or industry leaders detailing directly measured results of TV ad campaigns and individual spots delivered against designated objectives. Most of the campaigns involved TV networks placing program promotions on other networks to drive audiences to their shows.

My charts delineated the actual conversion rates of viewers presented with ads and measured at the set-top-box level across a "panel" of more than 30 million U.S. viewers, measuring the rate with which those viewers actually took the promoted action within several days of the ad delivery. The vertical axis scale went from zero to 25% in 5% increments.

The data points plotted on the graphs, which measured the actual conversion rate for each spot delivered, tended to range from lows of 4% to heavy clusters around 10% to top performers in the 20% range. In all of the cases, those viewers not exposed to ads tuned in at rates between 1% to 3%.

Yes. You understood it correctly. The TV spots converted an average of more than 10% of the viewers who saw the ads, a lift of more than 200% vs the control groups.

Having spent 18 years in online advertising, seeing lifts of 200% from targeted ads is not surprising to me. That is not unlike what I saw in my time at Real Media, TACODA and AOL. However, seeing conversion rates of 7%, 12% and  20% to "purchase" is. In the world of online display ads, "view-thru" conversion rates typically have decimal points that are two places to the left.

Certainly, program promotion is a somewhat special category of advertising. It has long been known that nothing sells TV like TV, and viewers when polled almost always credit TV promotion as one of the most important drivers of their viewing decisions. However, I think that there is something bigger at play here, and I think that it is critical for us to understand it, as we see TV become more Web-like and the Web become more TV-like.

Here are the factors that I believe drive the exponential difference in relative measured conversion rates between TV ads and online display:

• Online display delivers lots of impressions, but limited unique reach. Online display advertising has some well documented challenges. The medium delivers an extraordinary number of impressions cluttered -- and clustered -- in uncoordinated packs on fast-loading pages on sites that deliver frequency easily, but are very challenged to deliver the kind of fast-cuming reach and audience of the scale of TV. CBS, for example, delivers almost 5X the number of audience minutes every month in the U.S. as Facebook.

• Incomparable creative impact. TV delivers interruptive, lean-back sight, sound and motion in 15-, 30- and 60-second increments. One ad at a time. The creative mostly has  high production values. It's a great format to tell stories. Projects like IAB's Rising Stars, AOL's Devil and Web video ads are delivering superior formats, but are still quite nascent and sub-scale.

• Attributable sales impact. In categories like movies, consumer packaged goods, beverages, insurance, quick service restaurants and big box retail, marketers know that TV ads drive sales. Spending more or less on TV ads typically correlates directly to increases or decreases in the short-term sales of their products. Online display is not yet in that ballpark.

I believe that as the Web and TV come closer, the decimal points differences will shrink, but there's still a long way to go. What do you think?

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8 comments on "Two Decimal Points: The Difference In Effectiveness Between TV And Online Ads".

1. Jaffer Ali from PulseTV
   

   commented on: November 18, 2011 at 11:14 a.m.
   It would be a better to compare an online video "trailer" or promo for a new program to TV than a banner. Of course scale still becomes an issue, but scale is a problem for television. Do a promo during Conan on TBS and you are lucky to get 250,000 people to view.
2. Jason Carlisle from Audience Science
   

   commented on: November 18, 2011 at 11:50 a.m.
   Dave - I'm a long time reader, first time caller. Coming from a background in online display, the TV-related numbers you show here do seem really high relative to the online norms. How do these numbers account for the use of DVRs and the viewers who fast forward through TV commercials? In any event, even if your data is in the right ballpark it's encouraging that online has lots of room to improve as we close this gap.
3. Nick D from ___
   

   commented on: November 18, 2011 at 2:08 p.m.
   Really interesting article, and of course an issue that has been rumbling quietly for some time. The more online publishers try to compete for TV dollars, the more they will run into this issue. Your points about clutter and creative impact are very insightful, but you overlook the fact that when it comes to TV, advertisers are doing much more. Nobody would think of running one single primetime 30s ad and calling it a campaign, yet when it comes to the internet, brands are doing that day in, day out. $10k, $100k, even $1m is not a lot of money for media in an ad campaign, yet brands are spending that - and less - online, and squawking that they're not seeing the same results. There is an effect of critical mass, and we understand the concept in all the offline channels, but for some reason, not in online. For context, econometric work by a branch of OMD has explored the impact of different media on sales; their conclusion would seem to be that they don't actually know the optimal mix of spend on TV, digital etc, because they've not yet seen a campaign that had sufficient online spend to show any flattening in the ROI curve.
4. Dave Morgan from Simulmedia
   

   commented on: November 18, 2011 at 2:46 p.m.
   Jaffer, good point. A comparison to web video ads would be more apples-to-apples, which is the point. Most of our online display units aren't even in the same ballpark as TV ads.
5. Dave Morgan from Simulmedia
   

   commented on: November 18, 2011 at 2:48 p.m.
   Good point Nick. Few, if any online campaigns, are bought at comparable scale to TV.
6. Scott Turner from GfK MRI
   

   commented on: November 18, 2011 at 3:48 p.m.
   for consumer brands, few multi-medium campaigns are bought at the same scale as TV... is that a result of there being a 2 decimal point difference or is the scale of TV driving the difference?
7. Ned Newhouse from Conde Nast
   

   commented on: November 18, 2011 at 3:57 p.m.
   I think its fair to compare media impact against one another. Yes clearly there are flaws (TV ad vs a banner vs a preroll, comparing watching a show vs buying conversion rate from a banner, etc) in this analysis, but it bodes well for initiating conversation to Dave's point of writing this flaws and all. The better place to get to is really perform a careful scientific study comparison of each medium with a number of ad executions for a single product and then a control group to compare it to. Then we can get to the place that teaches us the right optimal way to use each media apart and together. Obviously its generally never using one over another, esp that people esp with new tech are shifting their consumption, so its about best practices and the tools to get there (that I might add- we need)
8. Dave Morgan from Simulmedia
   

   commented on: November 18, 2011 at 4:46 p.m.
   Scott, in this case, the impressions were isolated isolated individually, and most of the campaigns averaged 1.1 to 1.3 times average frequency, so I'm not sure that the campaign scale had much impact on the results. On an impression basis, the ability of a TV ad to create/change a consumer behavior a day or two later is pretty extraordinary.

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