TV and the great wastage illusion

TV and the great wastage illusion

Contrary to popular belief, advertisers on TV only ever pay for the audience they buy, writes Matt Hill – everything else is extra

In 2019, those misty, unlocked-down days, I wrote an article with the title “Exposing the black hole of online video advertising”. When we included it in the Thinkbox email newsletter, a proof-reading error led to it being promoted as “Online video’s back hole”. It got an eye-wateringly high clickthrough rate. I may now have to write one on that topic.

That aside, the black hole piece looked at how expensive online video advertising is relative to the cost of TV advertising. And that’s before we look at the different quality and value of the two.

Using 2018 data (we don’t yet have 2019 spend by channel yet), the maths was as follows:

— TV (incl. BVOD) accounts for 95% of video advertising time. Online video like YouTube, Facebook and the long programmatic tail together account for 4%. Cinema is the remaining 1%.

— In time terms, this means the average person watches 17.5 minutes of TV advertising a day (the 95%) and one minute of non-broadcaster online video advertising (the 4%).

— 2018’s Advertising Association/WARC ad spend figures showed that £1.9 billion was poured into that single minute a day and £5.1 billion into the 17 minutes.

— So, 4% of video ad viewing took 26% of video ad spend; 95% of video ad viewing took 70% of ad spend.

— Turn this into the comparable measure of cost per completed 30-second view and the average cost across TV advertising (linear and BVOD) for 30 seconds is just over £6. For non-broadcaster online video it goes up to a whopping £45.

So, the potentially brand unsafe, often small screen, often partially viewable world of online video costs advertisers seven times more than TV. This doesn’t sound like value for money. If I did the analysis now, with TV prices at spectacular lockdown levels – some 30-40% less than the same time last year – then the disparity would be even more mind-boggling.

Mixed response

My analysis inspired shock, surprise, and shocked surprise. There were also some challenges.

Two challenges in particular were a) that the high price of online video is justified because it hyper-targets audiences, and b) that basing comparisons on an all adults price – as I did – is unfair because it doesn’t factor in the higher price for smaller/harder to reach audiences and the resulting ‘wastage’. These are interesting. And they got me thinking about the idea of wastage in advertising and how the term is so badly used.

Broad reach is vital to build brands

While many brands have tightish target audiences for their most-likely buyers, most products are bought by most people to varying degrees. And, crucially, if the first time you see an ad for Mercedes is in your 40s or 50s (when you’re most likely to be in market for one), then it is too late. You need to have experienced years of brand exposure encouraging the desire to someday own one. Mercedes needs to ‘waste’ ads on people who are years away from being in the market for one of their cars.

The beauty of linear TV reaching people outside the target audience is that anyone who is not, say, 16–34 who sees your TV ad is absolutely free. Advertisers on linear TV only pay for the audience they buy; everything else is extra – bonus views. Not a penny wasted.

Online advertising is rife with wastage

It is the reverse story for online advertising. In online advertising, advertisers have to pay for every view their ads get, whether or not they are the desired audience. Nielsen data suggests that 65% of online impressions for 16–34s are ‘in target’, 35% ‘out of target’.

The chart below demonstrates the difference in the nature of online advertising and linear TV advertising. It compares campaigns buying 1 million 16–34 exposures. Linear TV isn’t perfect. When buying 1 million 16–34s the sampling margin of error is roughly 10% so you might get 10% fewer or 10% more 16–34s than you bought. But you don’t pay for any of the out-of-target audience, which, as you can see, is substantial. This exposure is absolutely free.

For a million 16–34 online impressions, on average only 65% will be aged 16–34. But the advertiser still has to pay for those who aren’t. There is nothing extra for free.

What about Broadcaster VOD though?

Hang on, you might say. Advertising in BVOD is online advertising. And, yes, that is true. Some TV is also online video. However, there are important distinctions to be made.

Due to the quality of the first-party data broadcasters willingly receive from viewers, their in-target audiences are much better – i.e. more accurate than other online video.

Also, as so much Broadcaster VOD is watched on large, shared TV set screens (70%), there is more out-of-target viewing that the advertiser won’t be charged for. This is different from other online video, where viewing is device-led and thus more individual.

Wastage should be defined as paying for stuff you don’t want – i.e. wasting your money. If we sensibly accept this, then linear TV doesn’t suffer from any advertising wastage. In fact, it offers the opposite: extra viewers for free.

Online advertising, despite selling itself on tight targeting, forces advertisers to pay for people they don’t want. This is another way that advertisers’ money is being thrown into online’s back hole. Sorry, black hole.

Matt Hill is director of research and planning at Thinkbox

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