Analysis & Opinion

Is the ad industry TV’s weakest link?

Nick Thomas, Principal Analyst at Informa Telecoms & Media

Nick Thomas, Principal Analyst at Informa Telecoms & Media

It was allegedly Lord Leverhulme, the British soap tycoon, who complained that half his advertising budget was wasted. The trouble, he said, was that he didn’t know which half. Advertisers like to think they have improved measurement in the past hundred years, but now there is a new risk.

TV advertising in particular has been the mainstay of the ad industry for decades, but as the way we consume TV shifts – from single screen to multiscreen, from linear to on-demand, from communal to personal – traditional TV advertising risks becoming irrelevant. The models need to evolve, and fast.

Broadcasters such as Channel 4 and BSkyB in the UK are experimenting with new ad formats that reflect the emerging media landscape, but early indications suggest that they face a big challenge persuading advertisers to invest in areas like multiscreen and social TV. Yes, these developments are nascent, but they are not negligible.

Alas, the advertising industry overall seems too eager to say why something won’t work (and, because of their influence, making that a self-fulfilling prophecy) rather than advocating and effecting the changes that are needed.

For the past five years I’ve worked in and around Charlotte Street, the hub of London’s advertising industry. Perhaps it’s that experience that has made me skeptical about the value agencies bring to the business.

The downturn in 2009 hit most industries hard, but as the rest of us knuckled down and cut back, I recall how our noisy neighbours on Charlotte Street seemed to enjoy long lunches like nothing had changed. While I was busy talking to media companies about the huge disruption they faced from digital trends and squeezed revenues, the ad industry was still out to lunch.

An unfair prejudice? Perhaps, but talk off the record to sensible ad execs and they will agree that change in their industry is long overdue.

At a recent media conference, one of the UK’s largest publishers explained that, to extend its magazine titles onto tablets, it had to (a) create its own ads, because the agencies weren’t able to build them, and (b) lend the media buyers 20 iPads because they didn’t have any in-house and hadn’t seen any examples of iPad advertising.

An isolated incident? Not according to the feedback from other publishers present. While the content providers are heroically reinventing themselves and their products, some in the advertising industry, it seems, are focusing on preserving the status quo. And that rarely ends well.

To be fair, it might be the brands themselves that are the source of this conservatism, sticking to the old familiar media outlets, despite the best efforts of their agencies to persuade them to innovate. TV is great for reaching a big audience, and its effect can be measured using metrics that are understood.

The agencies complain, not without reason, that some advocates of new platforms don’t understand the importance of establishing credible measurement tools: Facebook “likes”, for example, are all but meaningless.

But where is the innovation? The real danger is that if the money doesn’t follow the eyeballs, advertisers will simply be failing to engage customers on the devices and the content they are spending time with.

And if, instead of actively watching TV programs, millions of us simply have them on in the background while playing on our phones, tablets and PCs, the danger is that even more of the billions spent on TV advertising will be wasted. Advertisers will lose out, as will the content providers that rely on those advertising revenues to support their businesses.

Those companies are creating great new content experiences across TV screens and on tablets, PCs and smartphones: The way millions of us (here in the UK, at least) followed the 2012 Olympics coverage on whichever was the most convenient device was a blueprint for the future.

These rich, multiscreen services provide a deep and personal level of engagement. And although traditional TV advertising has been a phenomenally successful business, as the way we consume media evolves, will the ad business similarly evolve? It doesn’t seem to be happening yet.

Those of us who have a hunch that some combination of multiscreen video delivery and social interaction, along with the availability of reams of valuable personal data, will one day create an incredibly powerful platform for advertisers can easily be dismissed by those who say that a hunch is no good.

Fair enough. So build a way to measure that engagement. And find a way to sell that advertising across those multiple platforms and aimed at individual users. Surely the incentive could not be greater.

Advertising needs to be at the heart of a multiscreen, multi-device, targeted future. After all, the model that has kept you in business for the past 30 years won’t be working five years from now.

This article originally appeared in New Media Markets, a weekly subscription-based service from Informa Telecoms & Media that delivers a mix of specialist analytical research, exclusive news and business critical primary data on Europe’s fast-paced multichannel television sector.

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