Raymond Snoddy asks the experts whether TV can hold on to its advertising revenue
It looks easy to compose an elegy for television advertising in the UK. Its market share has been static for years.
Viewers are drifting to video-on-demand and gorging on box sets partly to avoid watching advertising.
Brexit could cause an economic slowdown directly hitting television advertising budgets. You can even hear voices predicting the eventual death of linear television.
More pressing, viewers are increasingly watching video on mobile phones and other portable devices, or away from the main TV set.
This is all viewing that, for the time being, traditional audience measuring systems find difficult to record.
Stewart Easterbrook, former digital director at Starcom MediaVest, the large media communications group, argues that traditional commercial television has simply become a less effective medium. Viewers may not be leaving in droves, he acknowledges, but the fact that they are consuming it on different platforms at different times has implications.
“The great thing about TV in the past was that it reached an awful lot of people at your chosen time in one hit,” says Easterbrook, who now chairs digital start-up companies.
“If you are a retailer who has a promotion starting tomorrow or your company is launching a new product tomorrow, if 30% of your audience is shifted across subsequent weeks it’s not as powerful a medium as it was. It’s a matter of degree, but it is a problem.”
Moreover, the disruptive viewing patterns of the young, in terms of when they watch, are starting to become more mainstream.
However, it is much easier to sing a happy tune about the future of television advertising, even with a few flat notes, than it is to write an elegy.
“What we see is opportunity. TV is robust from a revenue point of view. We use econometrics to plan into channels that really work, and TV works. It’s good and it’s strong,” insists Sue Unerman, chief strategy officer of MediaCom, the largest media-buying agency.
She highlights new research conducted with the client base of another WPP company, Group M, which suggests that only one in 20 Facebook ads are watched for 10 seconds or more and just one in three for three seconds or more.
It’s the programmes that make TV advertising tolerable to viewers
Unerman believes one big issue is that younger people are not necessarily watching less television – they are just watching TV on other devices and platforms.
The MediaCom executive describes as “unfathomable” what she sees as the slowness in integrating conventional and online data into products such as Barb’s Project Dovetail – a weakness that is costing media owners dear.
Unerman’s ultimate boss, Sir Martin Sorrell, chief executive of WPP, believes that TV remains “a strong and effective medium”.
His web of marketing and advertising companies is responsible for placing advertising across the globe worth around $76bn a year. When all screens are included, he reckons that viewing hours are increasing.
He suggests – like Unerman – that some advertisers have started to question TV as a platform only because current viewing data is not reliable enough. “Our systems of audience measurement have not advanced with the changes in audience behaviour,” he says.
Sorrell recalls how he watched BBC coverage of Mo Farah winning Olympic gold medals on his mobile phone in a restaurant in New York. Could any existing measurement system have picked that up?
Despite the challenges, over the next three or four years he expects commercial television to hold up well: “Newspapers have been under pressure but talk of the death of newspapers is overstated. Talk of linear TV’s death is also overstated, but there is pressure in the system.
“Trying to get advertising and subscription revenues from online content is not easy,” he concedes. “Commercial television will remain one of the, if not the most, significant factors [in marketing], but there are alternatives and linear channels should be aware of those alternatives and try to deal with them. There is no room for complacency. Paranoia rules.”
What do the latest numbers look like? Guy Bisson, research director of Ampere Analysis, believes that total UK television advertising revenue will decline slightly this year to £3.9bn, compared with around £4.3bn for 2016.
He predicts it will reach £4.5bn by 2021, with the slow recovery caused partly by Brexit.
Bisson is adamant that commercial television advertising is not facing terminal decline despite a challenging market that is shifting generally towards online.
ITV gets high marks from the analyst for what it is doing in the catch-up and over-the-top (OTT) space via the ITV Hub and the forthcoming BritBox streaming service, but it is still too UK-focused, compared with European peers, to protect future revenues.
Alex Wisch, media specialist at Bloomberg’s research arm, Bloomberg Intelligence, estimates that television advertising will “moderate” this year because of a decelerating economy, but forecasts that it will not fall of a cliff.
“I think that Facebook and Google are eating more into print advertising than TV – television is always in another league and has another purpose,” Wisch explains.
ITV declined to comment on advertising trends before its upcoming financial results, but suggested that the cost of television advertising is now similar to 2004 levels – and therefore good value.
In the first half of 2016, ITV delivered 98% of all commercial audiences over 5 million, the company said.
There is no room for complacency. Paranoia rules
Mark Howe, a senior Google advertising executive who worked in commercial television for more than 20 years, believes that, in the UK, commercial television is “in rude health” – as opposed to the US, where it is declining.
“Also, when I look at the UK, compared with markets in Italy and Spain, British broadcasters are in a very strong position to continue to drive the emotional engagement that advertisers are looking for,” says Howe. “Video remains one of the most evocative methods of reaching consumers with programmes and advertising.”
For Tess Alps, who chairs Thinkbox, the commercial TV marketing body, video in all its forms is growing. What is losing out, generally, is what she described as “static” forms of advertising – from newspapers and magazines to posters.
“The mistake is to think that one form of video is replacing another – that YouTube advertising must hit TV advertising. It’s not like that at all. They work better together. You need both,” says Alps.
The big difference between TV and fleeting online clips is that you are advertising around shows, she argues: “It’s the programmes that make TV advertising tolerable to viewers.”
Jenny Biggam, co-founder of the independent media agency The7stars, is at the sharp end of the issue. She decides where to spend her clients’ marketing money (including that of Iceland Food, Warner Music, Nintendo and Suzuki cars).
“The likes of Facebook come in and they are compelling and they work very hard to prise advertising money away from television, but what we find is that television continues to work really, really well for our clients,” says Biggam.
The marketing executive adds that, apart from mainstream advertising, the ITV, Sky and Channel 4 commercial teams also do very well at creating additional revenue opportunities through leveraging content, licensing deals and product placement.
“For the past two or three years, we have spent almost 50% of our total budget on TV. Every year, I think it will decline and every year it ends up at 50%. TV is very effective,” Biggam argues.
But will it still be 50% of The7stars budget in five years?
“Probably, yes, if you include the entirety of television such as video on demand,” concludes Biggam on a happy note for the future of commercial television.