The Lure of TV Advertising for Internet Businesses

• Bing
• Go Daddy
• Match.com
• Yahoo
• Overstock
• AOL
• Angie’s List
• MSN
• Superpages.com
• Hotels.com
• Monster.com
• Expedia
• The Ladders

• Orbitz
• Zoosk.com
• Intuit
• Tickets.com
• eBay
• Priceline
• Google
• Zappos
• eHarmony
• CareerBuilder
• Hotjobs.com
• SeeSaw
• Autotrader.com

Clearly, this trend must reflect an acknowledgment by online businesses - big and small - of the appeal and value of advertising on TV, even as the Internet continues to gain share of all media spending. In fact, over the past decade TV has increased its share of global ad dollars from 38% to 46%, confirming that, despite the illusion created by some media pundits who would have us believe that TV is on the ropes, the reality is that the industry continues to perform quite well.

There are several reasons for the continued success of television advertising. To begin, we need to recognize that the total amount of time spent by consumers watching TV is not declining, but rather is increasing. Sometimes it’s easy for people to confuse the fragmentation of TV viewing with a decline in total time spent. However, the reality is that consumers are watching more TV than ever before. This was persuasively illustrated by Byron Sharp et al of the Ehrenberg-Bass Institute for Marketing Science in a paper published in the June 2009 issue of the Journal of Advertising Research (subscription required). The study found that average ratings halve if the number of channels doubles and showed that declining ratings for individual shows or networks are due to fragmentation (more channels) not to reduced overall TV viewing levels, which are remarkably resilient to social and technological changes and to the emergence of new media. Professor Sharp also noted that audience fragmentation has actually been beneficial for the large broadcasters by driving up the prices for the higher rated shows: “CPMs don’t ignore media value, they monetize it.”

Interestingly, television’s popularity continues even as viewing of online video explodes. But here again, it’s easy to get confused by different metrics. The reality is that despite a dramatic growth in the number of online viewers and the number of videos viewed, the overall viewing of online video represents no more than 4% of total time spent watching TV. This approximates the annual percent growth in time spent watching TV.

A second reason for the continued appeal of TV advertising to marketers is that no other medium can compete with it when it comes to the reach that can be attained in a very short period of time. An individual high-rated TV show provides marketers with a unique opportunity to rapidly communicate advertising messages to the largest cross section of consumers possible in a 30 minute period of time. In today’s challenging economic environment time is money, which makes TV advertising extremely attractive to marketers.

The third and perhaps most important reason for TV’s continued popularity is that there is no evidence that the effectiveness of TV advertising has declined – even in the face of a dramatic increase in the number of media choices available to consumers. This was powerfully demonstrated by Joel Rubinson of the ARF in a paper also published in the June 2009 issue of the Journal of Advertising Research. In his study, Joel used seven different databases – accounting for a total of 388 case histories -- to determine whether there had been a decline in the effectiveness of TV advertising over time. The databases included results from advertising weight tests, market-mix modeling, copy testing (provided by Comscore ARS), return-on-marketing analysis from quasi-experimental design and media planning tools. Joel found that over the past 15 years TV has not declined in its effectiveness at generating brand sales lifts. In fact, the study revealed that there has been an increase in the persuasion power of the TV copy being used.

This latter point is important because most television copy is subject to extensive research and testing before the commercial is produced and put on air. Copy research seeks to confirm that an ad is doing its intended job in persuasively communicating the desired message. That type of due diligence is a way of life with branding advertising. There is an important lesson here for online advertising: in a branding world, advertising creative is critical. I discussed this issue in a Mediapost article earlier this year titled “Four Times Zero is Still Zero” where I sought to stress that a poor commercial won’t lift sales, no matter how much spending is put behind it (i.e. 4x0=0). As Internet advertising seeks to increase its currently meager 6% share of marketers’ spending for branding advertising and to move beyond a reliance on direct response marketing, using the right creative will become critical. This will be compounded by the move to the use of more expensive ad formats such as rich media and video. The cost of being wrong becomes substantial. It will be vital for the Internet to take a page out of television’s playbook and focus more of its research dollars on getting the online ad message right.