Future of TV Advertising: The Debate About Decline and Pathways To Growth
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Last week, I spoke at The Future of TV Advertising Global conference in London, which featured a wide range of globally-renowned industry participants speaking about traditional TV and its digital extensions or equivalents. Heads of sales at Disney and Netflix and the CEO of ITV were among them. Perhaps it shouldn’t be surprising that most presentations and related conversations around the event focused on television’s positive attributes, including its capacity to drive performance and meet marketers’ brand-building goals. At the same time, I noted a degree of dismissiveness about the revenue growth challenges that the industry faces not only in the US, but around the world.
I attempted to make two main points in two separate sessions on stage:
Traditional advertisers are shifting spend away from TV for a myriad of reasons (such as declining reach making it harder to accomplish goals, because advertisers need to fund budget growth in digital media, and because TV is not perceived – rightly or wrongly – as a performance medium).
Newer advertisers – the digital endemics, or “online born” marketers - spend a lot on advertising, but their budget shares allocated towards television are significantly lower because their businesses are oriented far differently than older ones. This second group is unlikely to ever allocate anything like the shares allocated to TV by the first group, and over time they will (if they haven’t already) overtake the world’s traditional marketers in terms of spending share. Because of these characteristics, a shift in the mix of the world’s advertiser base requires only simple math to identify an inevitable long-term decline for the medium as it presently organizes itself.
Both of these factors will be true in most countries around the world, and at least so far this year, where we have a strong overall advertising market and a weak TV market, it seems to be playing out.
However, I don’t think everyone was convinced. Perhaps one factor that might explain what could be characterized as dismissive attitudes is that some in the industry believe that what’s right and good for marketers pre-determines what marketers will do with their budgets. Or perhaps there is a pre-supposition that because marketers’ brands have mattered historically they will continue to do what they should to do to support them in the future.
Unfortuately, good decisions do not always trump bad ones. On the contrary, over many years of studying the advertising industry and marketing budgets, I have found that bad decisions are often made because they are better than worse ones, accounting for a wide range of business considerations that are hard for media owners or agency executives to fully appreciate.
I’m not arguing what marketers should do, but instead am trying to explain what they will do. Anyone trying to understand where the overall industry is going should focus on the latter, not the former, because some of its outcomes are inevitable.
I thought the debate was captured well by The Media Leader, a publisher whose parent company hosted the event (it can be read here.)
Separately, in a blog post yesterday, Google affirmed its plans to initiate Tracking Protection, “a new feature that limits cross-site tracking by restricting website access to third-party cookies by default” to 1% of Chrome users globally beginning on January 4, with full phase-out of the use of third-party cookies in the second half of 2024.
I wrote previously about some of the consequences that will likely occur to sellers of digital advertising as the industry stops relying on third-party cookies. It seems self-evident that walled gardens or entities with substantial volumes of first-party data should be beneficiaries in the post-cookie world.
I have one consideration to add here in context of television advertising: because marketers will increasingly rely on the first-party data that sellers of advertising provide, this could create a pathway for TV network owners with streaming services (and identifiable subscribers) to better support the performance-based goals that marketers increasingly focus on. Doing so with significant revenue volumes will probably require much more operating scale than today’s traditional TV network owners have on their own at present, especially in Europe where incumbent broadcasters have not invested as aggressively in subscription-based streaming services. This could be another factor supporting media industry M&A, or otherwise steer traditional media companies to partner more substantially with digital platforms and retailers (at least those who sell commerce media) than they presently do.
To be sure, there can be pathways to growth for the TV industry, but chances wlil be much improved if its participants focus on where overall advertising budgets are going rather than on where they have been.