ITV boss - digital's losing its sex appeal to TV advertising

Stuart Lauchlan Profile picture for user slauchlan March 2, 2016
Digital advertising has been the sexy spend option for the past few years, but according to ITV CEO Adam Crozier, it's traditional TV channels that are proving more attractive today.

Dowager defeats digital?

TV has become the high street window for digital businesses.

Here’s a bit of counter-intuitive thinking.

Conventional wisdom would have it over the past five years that digital advertising was becoming the be-all-and-end-all, supplanting conventional platforms like TV. But if Adam Crozier, CEO of UK TV network ITV, is correct, that’s flipping on its head.

The argument from ITV executives now is that many companies who’ve said over the past five years that they’re allocating their ad spend to digital, are now coming back to television as a more successful medium. In other words, digital - you were the future once.

For the benefit of non-UK readers, ITV is the main commercial broadcasting network in Great Britain. Unlike the BBC, which is funded by a statutory license fee paid by all owners of a TV set, ITV pays its own way through advertising and sales of programming overseas, including Downton Abbey, Midsomer Murders and Poirot.

It’s just turned in net advertising revenues for 2015 to £1.7 billion, up 6% from £1.6 billion in 2014, the sixth consecutive year that it’s seen profits rise. That leads Crozier to say:

What is for certain is that television advertising is outgrowing advertising generally and therefore clearly that money is coming from somewhere. I think it’s hard to tell this early where it’s coming from, whether it’s from digital or from press, magazines, whatever.

But he can guess:

Genuinely we’re getting a lot of feedback, both here and we’re hearing the same in America, some concerns on the digital side. Not that it won’t keep growing, by the way, because it has been. But I think people are recognizing that different media deliver different things for advertisers.

It’s all about the balance and how you use those things together. So I think all these brands, either new to or coming back to TV, is a sign that television advertising does work. There are plenty of studies that show it is more effective than anything else out there.

Sex appeal

Advertisers have been lured by the sex appeal of digital, he speculates:

I think it’s probably that natural thing of people were quite happy to invest in digital because it was the new thing. It was the sexy thing, as Martin Sorrell would say. Suddenly when it gets to a certain level, people start to think, “Well crikey we’re putting quite a lot of money in this now. Oughtn’t we maybe to check whether it’s really working and what we’re actually getting back for it?”.

That’s just a sign of maturity, I expect. I don’t suddenly have a downer on digital advertising. I think they’ve just reached that point where people are starting to be a bit more questioning about what it does. It will become part of what people do as opposed to a driving force. So I think we’ve probably reached an interesting moment in that.

Crozier also makes the claim that TV advertising is increasingly recognized as more cost-effective than other platforms:

TV advertising remains the most efficient and effective media for advertisers, helped by the fact that, despite some inflation in the market last year, TV is in fact 30% cheaper in real terms than it was 10 years ago.

Genuinely, I’m not trying to make a clever point about it, but there is concern amongst bigger advertisers. One is this idea that somehow developed that you could compare a 3-second ad online, often without any audio, to a 30-second TV ad in terms of impact. [That] is clearly, if you stop to think about it, not right.

For a lot of brands they realized that whilst on paper they may look like they were being more efficient in their advertising, the reality is they weren’t being noticed and they weren’t generating fame for the brand. And I think that that, allied to the cost effectiveness of TV, is really what’s driven a lot of advertisers back onto television.

Smart TVs and the rise in the use of mobile devices for streaming content are also factors that need to be taken into account, says Crozier:

The fact that so many TV sets are now becoming connected and mobile viewing is important.  I think that’s also changing this too because people are able to reach these digital and online audiences using more traditional means, i.e. advertising in and around our programs, or Channel 4’s or Sky’s or anyone else’s.

Size also matters, insists Crozier::

Our strong advertising growth is driven by our unrivalled reach. And we are continuously focused on delivering the mass audiences that advertisers demand, and of course on strengthening our on screen performance more generally. Whilst there are many challenges in our industry that we do need to be alive to and adapt and evolve to meet, we believe that television remains the key communications tool for advertisers.

ITV is without doubt, the biggest and most effective marketing platform for advertisers in the UK. Our unique ability to deliver those unrivalled mass audiences remains right at the heart of our commercial proposition, that ability to deliver 98% of all the commercial audiences over 5 million, 93% of all of those over 3 million.

TV delivers reach scale and fame for brands, with a trusted and evolving measurement system, whilst there are growing concerns amongst a number of big multi-national advertisers about the impact of digital ads versus the fame that TV drives, and indeed the level and impact of malware leading to false impressions and ad fraud.

The ultimate irony perhaps is that one of the new sources of revenue for ITV is coming from the online businesses that are pitching their own digital advertising models. Crozier says:

Online businesses invested over £500 million in television in 2015, up 14% year-on-year. The year’s biggest new advertiser on TV was in fact Facebook, who invested £11 million. And by way of another example, Google, Facebook and Netflix all spent more than 60% of their marketing budgets on TV. Effectively TV has become the high street window for digital businesses.

My take

An interesting thesis, although I suspect the reality is nowhere near as simple as is suggested in Crozier’s argument. Clearly the key here is one of finding a balanced mix that is appropriate to whoever the target audience is.

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