Unrisky business TV ads create 71% of advertising-generated profit finds Ebiquity/Gain Theory study
- Independent study of over 2,000 ad campaigns quantifies advertising’s business impact
- £ for £, TV advertising out-performs all other media investments, in both the short and long term
- Data enables risk assessment of different types of advertising to identify safest investments
London, 16 November 2017: After a decade of change in advertising with the emergence of many new forms of advertising competing for investment, a new study has for the first time quantified the total profit generated by different forms of advertising to show what they actually deliver to the bottom line.
Published today, the study – ‘Profit Ability: the business case for advertising’ – proves that all forms of advertising create profit to varying degrees in both the short and long term. On average, advertising creates a total profit return on investment (ROI) over 3 years of £3.24 per pound spent.
Within this, it found that TV advertising:
- Delivers the largest volume of both short-term and total advertising-generated profit
- Is the ‘safest’ (lowest risk) advertising investment a business can make, with the highest likelihood of profit return
- Continues to be the most efficient form of advertising with the highest ROI per pound spent
The study was commissioned by Thinkbox from Ebiquity and Gain Theory, who independently evaluate advertising performance and effectiveness for hundreds of brands. In total, it analysed over 2,000 advertising campaigns across 11 categories to uncover the impact that different forms of advertising have on short-term profit (within 3-6 months of a campaign finishing), and then combined these learnings with results for profit generated over the longer term (up to 3 years on) to determine total profit return.
This table summarises the key findings:
TV creates the most £ for £ profit
Ebiquity and Gain Theory found that TV advertising is responsible for 71% of total advertising-generated profit at an average profit ROI over 3 years of £4.20 for every pound spent, the highest ROI of any media.
TV is followed by Print (which accounts for 18% of total advertising-generated profit), Online Video (4%), Out of Home (3%), Radio (3%), and Online Display (1%). Online Video advertising includes both Broadcaster VOD (VOD services provided by the UK’s TV broadcasters) and online video advertising on sites such as YouTube and Facebook.
TV was also found to be the most effective short-term form of advertising, responsible for 62% of all advertising-generated profit in the short term at an ROI of £1.73 for every pound spent, also the highest of any media. This is followed by Print (22%), Radio (5%), Online Video (5%), Out of Home (3%) and Online Display (2%).
TV is the safest advertising investment
By examining the proportion of campaigns by different forms of advertising that made a profit for the advertiser, Ebiquity and Gain Theory identified the relative safety of different advertising investments.
TV was found to be the medium most likely to create advertising-generated profit both in the short term and the long term.
In the short term, 70% of TV advertising campaigns delivered a profitable return. This is followed by Radio (62%), Print (61%), Online Video (52%), Online Display (37%) and Out Of Home (19%).
Looking at total profit success during the 3 years after ad campaigns finished, 86% of TV advertising campaigns delivered a profitable return. TV is followed by Print (78%), Radio (75%), Online Video (67%), Out of Home (48%), and Online Display (40%).
TV continues performing at high levels of investment
The study found that TV delivers so much profit to advertisers because its scale and popularity enables it to continue being effective at high volumes of investment. Advertisers can increase investment in TV to a higher level than other media and it will continue to generate a profitable return.
Strong case for growth in TV investment
The study concludes that advertisers may be missing out on maximising advertising-generated profit by under-investing in TV. Currently, TV accounts for 54% of advertising spend among Ebiquity’s database, yet it is responsible for 71% of total advertising-generated profit.
Andrew Challier, Chief Client Officer, Ebiquity:
“The study is important because it shifts the emphasis away from the ROI number ‘arms-race’ to a more responsible approach that talks about the scalability of ROI by media channel, and the impact that this has on profit generation. This is arguably more business-relevant and almost certainly of more interest to CFOs.”
Nick Pugh, Director, Ebiquity:
“This study demonstrates that advertising drives significant profitable growth and provides the business case for investment. It is crucial that businesses now see advertising as an investment rather than a cost.”
Matthew Chappell, Partner, Gain Theory:
“In a world of big data and advanced analytics, the lure of the easily accessible stat or number can be overwhelming. Too often the easy measures are skewed towards the short term. One of the key aims of this study is to provide something of a correction: to move thinking and measurement from short to long term, to focus on what drives fundamental business success, and to give marketers the tools to do so.”
Matt Hill, Thinkbox’s Research and Planning Director:
“Businesses are under immense economic pressure and marketers have to justify everything they spend. It is crucial that we constantly refresh and update our understanding of what different forms of advertising contribute so that marketers are spending wisely. This study by two highly respected, independent organisations with robust data at their disposal bridges the gap between the marketing and finance departments with compelling evidence that quantifies advertising’s ability to deliver shareholder value, and TV’s centrality to that.”
Thinkbox is dedicated to proving advertising effectiveness. As well as commissioning effectiveness studies from respected independent companies it has also consistently supported robust studies by other organisations, most recently as a co-funder with Google of the IPA’s ‘Media in Focus’ report by Les Binet and Peter Field. The 2017 study – which analysed the IPA’s databank of effectiveness case studies – concluded that TV remains the most effective form of advertising and is getting more so.
TV facts and figures:
- The average UK viewer watches 3 hours, 38 minutes a day of TV, broken down as:
- 3 hours, 26 minutes of ‘industry standard’ TV set viewing (on a TV set within 7 days of broadcast)
- 9 minutes of additional TV set viewing (8-28 days after broadcast)
- 3 minutes of additional viewing on other devices (sources: BARB and Broadcaster data, H1 2017)
- Commercial TV reaches 91% of the UK every week, 97% a month (source: BARB, H1 2017)
- TV accounts for 75% of UK video viewing (source: Thinkbox 2016 video analysis)
- YouTube accounts for 6.4% of UK video viewing (source: Thinkbox 2016 video analysis)
- Facebook accounts for 1.7% of UK video viewing (source: Thinkbox 2016 video analysis)
- Subscription VOD in total (incl. both Netflix and Amazon) accounts for 4.1% of video viewing in the UK (source: Thinkbox 2016 video analysis)
- An average broadcast TV advertising campaign in the UK gets 238 million views (source: BARB, H1 2017)
- TV advertising: spot advertising
- Radio advertising: spot advertising
- Print advertising: print newspapers and magazines
- Online Video advertising: Broadcaster VOD, social VOD (e.g. Facebook), YouTube
- Online Display advertising: online static display (e.g. banner ads, incl. Facebook static ads)
- Out of Home advertising: 6 sheets, 48 sheets, 96 sheets (standard & digital formats)
- Profit: gross profit (i.e. advertising-generated profit achieved once the cost of the goods being sold has been deducted)
Ebiquity analysed their database of over 150 clients to understand the impact of media investment in the short-term (up to c. 3 months after a campaign’s end). This included econometric analyses covering 11 sectors and 1,900 campaigns that ran between 2014 and 2017.
Gain Theory conducted an analysis on their own pool of advertiser data (2014–2017, 29 advertisers across 504 campaigns). They measured the longer-term impact of the effects of advertising on the future base of sales. Using a technique called ‘Unobserved Component Modelling’, Gain Theory could model the impact of a moving base of sales. This differs from standard econometrics where the base is assumed to be flat. This analysis allows advertisers to understand the impact their advertising has in the longer-term.
The findings are representative of the average performance of larger, better known advertiser brands whose media is bought by the major media agencies and is professionally audited by Ebiquity and/or Gain Theory. It does not include online search as this is a demand-harvesting rather than demand-generating investment. For the same reason, the value of high street location or prime shelf space in supermarkets is not included in this study.
Thinkbox is the marketing body for commercial TV in the UK, in all its forms. It works with the marketing community with a single ambition: to help advertisers get the best out of today’s TV.
Its shareholders are Channel 4, ITV, Sky Media, Turner Media Innovations and UKTV, who together represent over 99% of commercial TV advertising revenue through their owned and partner TV channels. Associate Members are Discovery Networks Norway, Disney, London Live, TAM Ireland, Think TV (Australia), thinktv (Canada), TVN Media (Poland),TV Globo (Brazil), TV2 (Norway) and Virgin Media. Discovery Networks UK & Ireland, and STV also give direct financial support.
TV has more to offer advertisers than ever before. In a cluttered media world, with new voices clamouring for advertisers’ attention, TV continues to stand out as proven, trusted and – most importantly – pre-eminently effective.
TV shapes popular culture. The investment our broadcasters make in premium quality TV shows catering to every taste – and available on any screen you wish – creates an advertising environment that is second to none.
From ensuring that the facts about TV are known (and myths challenged) to understanding how and why TV advertising works, explaining how TV is changing, showcasing innovative and affordable solutions and constantly providing the rigorous proof of effectiveness that advertisers need, Thinkbox is here to help businesses meet their marketing objectives.
Ebiquity is an independent, global leader in marketing and media analytics. Working with 80 of the top 100 global advertisers, Ebiquity employs over 900 people including data scientists, developers, modellers, analysts, and digital and media experts. Ebiquity’s Marketing Performance Optimisation division has conducted hundreds of marketing effectiveness projects, in the process building a database of literally thousands of econometric models which measure the ROI of media and marketing investments.
About Gain Theory
Gain Theory is a global marketing foresight consultancy that brings together data, analytics, technology solutions and consumer-insight capabilities. It combines WPP’s intellectual capital in media, marketing, data and technology to create a consultancy that helps brands make smarter, faster, predictive business decisions.
The Gain Theory team is a fusion of 250 world-class creative minds from the data, technology, marketing analytics and effectiveness domains operating out of hubs in New York, London and Bangalore. Global clients include: Diageo, Target, Unilever, HomeAway, Vodafone and Aldi.