TV advertising in a cost of living crisis

The cost of living crisis, compounded by market instability, inflation, and high interest rates, is naturally a major concern for advertisers and their brands, as well as broadcasters and streaming platforms. 

Indeed, we have already seen significant changes in the video ecosystem thanks to reduced household budgets - with subscription-based streaming platforms losing subscribers and introducing ad-funded tiers to lessen the impact. 

At the same time, advertisers faced higher prices for linear TV advertising over the past year, driven by a surge in demand coinciding with a fragmentation of audiences. 

For advertisers, two key questions will be on the mind: the age-old ‘should I maintain spend through a recession?’ and ‘is TV delivering value for me?’. Here, I outline what advertisers need to know.

Burgeoning TV options

For one thing, on demand TV viewing continues to grow, offering advertisers a cost effective way to present their hero ad in premium environments. Broadcasters have upped the ante on providing digital options for viewers and advertisers alike. For example, ITVX, the UK’s new, advertiser-funded, free streaming service, is a significant win for advertisers. 

The platform not only boasts first-to-air content that beats linear by months, but the rewiring of its architecture should make it a more user-friendly platform than its sometimes temperamental predecessor ITV Hub. 

So long as it delivers on its promise, viewers will certainly embrace such a proposition, creating a huge new digital audience pool for advertisers in the process.

Meanwhile, Disney+ introducing ads may not surprise anyone given that Disney has never been a stranger to advertising, but Netflix has repeatedly doubled down on its conviction that ads were anathema to its business model. 

This may explain why Netflix has hinted at ‘jaw-dropping’ CPMs, but once the initial rush dies down and prices (hopefully) hit a more reasonable level, it will be exciting to see how ads on the platform perform, and whether an audience base accustomed to uninterrupted viewing will adjust to this new reality for a cut down cost. 

Certainly many will remember the backlash to Instagram introducing ads - something that is now an accepted and expected part of the platform.

The merits of ad investment

You’ve heard it before: don't cut adspend in a recession. Well, there's a good reason for this received wisdom; if a business cuts marketing investment in response to tough economic conditions, it seriously weakens its brand, and limits its long-term growth and profitability prospects. 

Multi-decade data from the IPA covering numerous recessions proves this, and shows that brands that didn't make cuts could record five times as many significant business effects, including profit and share, and four and half times the annual market share growth.

Furthermore, brands that invested an excess share of voice (ESOV) of more than eight per cent in recession were “significantly” more likely to report very large profit growth, and were more likely to record larger increases in market share. 

Yet beyond the fact that going dark can have such serious repercussions for brands, people are also more open to new shopping behaviours during a recession - for example, switching favourite FMCG brands for lower cost alternatives, or even switching big purchases like insurance.

This is due to a cognitive bias which encourages behaviour changes and open-mindedness during periods of heightened stress, or after major life events or changes. We are all more sensitive to new information when our habits are disturbed, meaning that advertisers looking for acquisition are in a key moment. 

In recognition of this, at Total Media we use behavioural insights in our media planning, creating opportunities to make advertising more relevant, and thus deliver improved ROI. 

And these opportunities now coincide with more, and more new ways to invest in TV as established players innovate and new players enter the market. It’s clear that for TV advertising, this is a moment of change and of exciting new possibilities. 

Liz Duff is Head of Commercial and Operations at Total Media

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