Are National TV Ads Actually Too Cheap?

  • by , Featured Contributor, October 18, 2018
The following was previously published in an earlier edition of Media Insider:

Did you know that the average price across all national TV advertising in the U.S. is less than $2.50 CPM? In fact, $2.26, to be more exact.

Are you surprised by how low that number is? Most people I talk to are, particularly if they come from the digital world. There, most branded premium video ads against broad targets sell for CPMs more in the $10 to $75 range. Most folks assume TV is at least as expensive.

Where did I get that number? I based it on Nielsen AMRLD data and Kantar ad occurrence data, in which national TV broadcast and cable networks delivered 19 trillion ad impressions over the past year. According to Magna Global’s numbers, national TV advertising generated $43 billion last year. Divide the second by the first and you get a $2.26 cost per thousand. Pretty sobering.

Over the past week, I’ve asked a dozen folks in the industry to make their best guess of the average CPM of national TV advertising in the U.S. Only two were close (almost exact, actually), but each of them run TV network sales groups. All of the others, mostly digital folks, guessed dramatically higher numbers.



Why this disconnect to reality?

Demo and dayparts confuse the macro story. Almost every time you hear or read about TV ad CPMs, it's in terms of the 18-49 demographic segment (only 40% of the TV audience) and relative to prime-time shows (perceived as the most valuable and scarcest). And, sometimes, the numbers even have the “broadcast” caveat, which typically have higher prices than their cable programmer brethren. Virtually all trade and business stories about TV advertising tend to use language like “$42 CPMs against the demo on broadcast prime,” not “all P2+ (persons two and older) and aggregated across all networks, days and dayparts.” How quickly $42 can become $2.26.

TV measurement language is very different from digital. TV people talk differently than digital people, and vice versa. Most digital folks I talk to don’t even know the term “P2+.” Enough said.

TV advertising delivers massive scale, which is underestimated by most. Once again I remind you that today, “Judge Judy delivered more audience ad minutes (more people in the U.S. watching more video ad time) in just two 30-minute episodes than all of the video on all of Google’s YouTube watched in all of America all day. Yes, all videos in all of the U.S. all day long.

What are the implications of TV advertising's $2.26 average CPM? First, to anyone who understands the power of media, and the unique power of TV's sight, sound and motion and quick sales-driving impact, you can’t come to any conclusion but that a lot of TV advertising is underpriced. 

For sure, most marketers and most TV ad buyers can’t access TV in the ways that they need to exploit it in the way that they can with digital deeper targeting datasets, ability to pick and optimize at the spot level, fast reporting and fast creative swapping, centralized cross-network optimization. However, there are initiatives under way at all of the TV companies to solve these issues.

What might the future hold? I believe that better use of data, science and software is going to enable TV companies to drive higher prices over the next three or four years' prices -- $3.50+ CPM on average is certainly reasonable -- and still deliver even better and more predictable ROI for advertisers.

That will happen, and most folks will win. TV networks will get more yield on their audience. Advertisers will get more customers. Nielsen and other data companies will sell more targeting and measurement data. And consumers will get more relevant ads.

What do you think?

3 comments about "Are National TV Ads Actually Too Cheap?".
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  1. Douglas Ferguson from College of Charleston, October 22, 2018 at 7:47 a.m.

    Commercials only have value if they are watched. Too many viewers have figured out how to avoid the ads. Even my 84-year-old mother-in-law has learned to hit the audio mute button.

  2. Ed Papazian from Media Dynamics Inc, October 22, 2018 at 10:42 a.m.

    As someone famous once said, "There you go  again" , Douglas. If what you are claiming, namely that nobody ever watches TV commercials---an obvious absurdity----  is true then advertisers are the biggest bunch of idiots one can imagine. What dolts, "wasting all of that money", yet somehow their ad campaigns still rack up fairly impressive ad recall levels and there are endless examples of store sales correlating with GRP tonnage. 

  3. Robert Dilworth from DILigent Marketing, October 24, 2018 at 10:23 a.m.

    Douglas, advertisers in the US purchase advertising based only on the commercial audience, check out the definitions of C3 and C7. Someday, Canadian advertisers will do the same.

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