TV ads are still effective in creating demand, research shows

marketwatch.com

Digital ad spending is expected to overtake TV, but a multiscreen approach may be best

Television broadcasters worried about the migration of ad dollars to digital video may be cheered by research this week that suggests reducing spending on television spots has a negative impact on sales.

A study by TiVo Research, in partnership with customer engagement consulting firm 84.51 and media companies including A&E Networks, found that sales declined at 15 consumer packaged goods (CPG) companies that cut their TV advertising. The companies, who are not identified, cut their TV budgets between 20% and 70%, generating a combined sales loss of $94 million., the study found.

“In today’s multi-screen content universe, consumer brands are reallocating advertising dollars to digital spend, however, our research found that TV advertising is more effective than ever,” said Betsy Rella, vice president of research at TiVo Research, in a statement.

Experts say fears that digital will upend the TV ad market are likely exaggerated, even if the growing popularity of mobile devices as a way of viewing entertainment will continue to pull dollars in that direction.

“There’s a lot of concern and defensiveness in the industry in proving the value of traditional television advertising. There doesn’t need to be,” said Andrea Fishman, principal with PwC’s advisory practice.

Fishman acknowledges that digital video is growing, and the spend will overtake television within the next couple of years. U.S. digital ad spending is expected to total $58.61 billion this year, with $7.77 billion spent on digital video ads, according to eMarketer. That figure includes all of the different kinds of advertising on digital platforms. By sector, retail leads the way with 22% of that spend, but CPG companies are second with 8.5%.

However, “you’re starting to see television, coupled with social media, coupled with real-time feedback,” said Fishman. “People doing it right understand the multiscreen effect.”

Clients and their advertising agencies are increasingly taking that approach with positive results.

“If you took a client who’s all television and made them all digital, I can believe that,” said Adam Kasper, chief media officer at Havas Media, referring to the TiVo Research findings. Havas Media is a marketing firm whose services include media buying and planning, content development and social media strategy. “But we’ve had success in taking parts of television buys and moving them into digital.”

Moreover, the sales decline described in the TiVo Research findings cannot be extrapolated to all other sectors.

“In all the models we’ve ever done and looked at, online video works just as well as television, even in driving retail sales,” he said. “I’m sure there are instances where that didn’t happen, but generally that’s not something we would see.”

For CPG companies in particular, television is still an important category because of the “broad awareness” that it affords, said David Stopforth, director of media at advertising agency Wieden + Kennedy. So these companies are thoughtful about pulling those ad dollars.

“It’s usually that the category is in distress, like the high-sugar soft drinks,” he said. “So even if they didn’t decrease the spend, the sales might have gone down.”

Television broadcasters are also competing with improvements in video, from the quality of the image to the ability to measure the return on investment.

To combat this, television companies need to highlight their advantages, including good content made with healthy budgets, said Stopforth.

“Regardless of what you’re trying to view, you’re still going to default to the best available screen, which is usually the television,” he said. Even the streaming services that are growing in popularity, like Hulu and Netflix  are widely viewed on a television screen. Hulu is jointly owned by Disney Co.  , 20th Century Fox  and Comcast Corp.’s NBC.

There’s also certain programming that is exclusive to live television broadcasts.

“Television is absolutely still a major part of a company’s media plan,” said Havas Media’s Kaspar. “Certain areas of television have become critically important, while others are replaceable.” Sporting events and awards shows are examples of critical programming.

“And then you might look at lower-tier cable, which is absolutely fine, but what you’re achieving with that could probably be achieved with online video,” he said.