In 1941, New York station WNBT broadcast the first television advert. The spot—for the watchmaker Bulova—ran before a baseball game between the Brooklyn Dodgers and Philadelphia Phillies and is believed to have cost the company between $4 and $8 (between $82 and $164 today).
It seems quaint now. The global linear TV advertising spend is expected to hit $196 billion this year. It is an unimaginably colossal business, worth more than print, out-of-home, cinema, and radio advertising combined. And, perhaps counterintuitively, given its prominence, it’s also deeply flawed.
Advertisements generally have two main objectives: to raise awareness for a brand or product, and to drive sales. But the return on investment (ROI) is often underwhelming, even for the most recognizable brands. As one 2021 study from the Kellogg School of Management shows, the median TV advertising elasticity was found to be just 0.1%—or, put another way, companies would have to double their ad spend to increase sales by a single percent.
Worse, two-thirds of brands failed to see any meaningful impact on their TV ad spending. For brands, this is a crisis—but not one of results. It’s a self-inflicted wound caused by a failure to recognize the seismic demographic and consumption trends within media and, more fundamentally, a failure of creativity.
Times change, but many brands are still working from a 1990s-era playbook. And the results speak for themselves. Not only are the world’s biggest ad buyers seeing suffering (if not diminishing) results from their most expensive ad channels, many have failed to grasp the opportunities that the data-rich, nonlinear digital era presents.
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In 2008—a time before Netflix and Hulu, when linear TV was the default and digital advertising accounted for just 15% of all ad spending, compared to 67% today—the Association of National Advertisers issued a report that showed a majority of marketers believed TV ads were becoming less effective.
Those warnings were prescient. TV ads—particularly linear TV ads—always suffered from a lack of targeting. While you could align a campaign with the expected demographics of a particular program, you couldn’t really go beyond that point. Marketers struggled to figure out what worked and what didn’t. Digital ads provide detailed information on who clicks through and who converts. It’s virtually impossible to obtain that attribution in the linear TV world (where the majority of this spend still goes).
For the sake of fairness, this has always been a problem with TV as an advertising medium. Marketers learned to tolerate it because TV historically enjoyed a massive reach. Before the digital era, linear television effectively had a captive audience. Viewers tuned in because they had no other alternatives.
Obviously, that is no longer the case. In 2022, U.S. VOD (video-on-demand) audiences exceeded linear TV audiences for the first time. Cable audiences shrunk by 8.9%—a damning figure, particularly when you’d assume that viewership would be higher, given the intermittent chaos of the COVID-19 pandemic.
It’s not merely that the digital era has reshaped audience demographics, making them fewer and, increasingly, older. The reality is that changes in consumption patterns have fundamentally altered how people engage with linear content on a cognitive level. One study shows that as media consumption habits gravitate toward digital offerings like streaming video, people are more inclined to “tune out” ads when watching linear TV.
Older viewers, namely those in the 55-plus age bracket, are significantly more likely to stop paying attention. This group accounts for an increasing share of TV audiences, and is also one that didn’t grow up with online alternatives like YouTube and Hulu.
The report’s author noted that consumers increasingly have a different relationship with advertising. Per Hanna Kahlert, advertising has “turned from brand recognition and loyalty to a click-through-to-purchase, instantaneous, and one-off interaction.” That’s troubling when you consider that TV advertisements are often part of a broader and multifaceted campaign, where the objectives include things like brand-building and consumer awareness.
A Wider Crisis
Let’s pause here. While the challenges faced by marketers reliant on linear TV advertising are many, it would be unfair to say that it’s the only sector of the advertising landscape that is facing challenges. Whereas TV advertisers are victims—at least, in part—of their own inertia, other niches face crises that are external in origin and harder to mitigate.
Digital advertising, for example, faces a moment of unparalleled turmoil. It’s a data-driven industry that’s increasingly losing access to the data required to profile, segment, and target individuals. This, in turn, means pricier campaigns and lower return-on-ad-spend (ROAS) numbers.
Digital advertising is undergoing a death by a thousand cuts. First, the European Union’s General Data Protection Regulation (GDPR) came, bringing with it new rules governing user consent and data acquisition. According to one industry group, GDPR had an immediate impact on the marketing industry, leading to a consolidation of vendors and new logistical challenges when it came to the cross-border processing of data. It also inspired similar legislation in other nations and territories, including Brazil, Japan, Canada, and the state of California, to name but a few.
Compounding matters, Apple began requiring user consent for in-app tracking. With most users refusing consent, in-app advertisements began losing relevance and efficacy. Facebook, a popular channel for digital marketers, was particularly affected, losing $13 billion in revenue in 2022 as a result. Developers saw declines in ad revenue as high as 40%, suggesting lower CPM rates and thus lower efficacy.
And for online advertisers dependent on tracking, the worst is yet to come. Next year, Google intends to deprecate third-party cookies in the Chrome browser, effectively closing one of the most valuable sources of data for digital marketers. The proposed alternatives have largely failed to reassure marketers that they’ll still be able to target content with the same level of accuracy that they’re accustomed to.
These crises show that there are no safe havens. You can’t substitute one advertising medium for another. Rather than pivot, the advertising industry must adapt and learn to effectively use the channels at their disposal (TV included), factoring in the seismic societal and technological changes that have occurred over the past decade and beyond.
Changing With the Times
The problem of the dwindling power of one particular advertising medium cannot be solved through brute force, by which I mean increasing ad spending exponentially. As the Kellogg School study mentioned earlier showed, you can’t buy attention or capture it by blanketing screens with the same ad. You have to earn it.
In reality, achieving this will require creative solutions across mediums. There won’t be a single silver bullet. No one-size-fits-all fix. But allow me to start the ideation process: Maybe the TV world should borrow ideas from the worlds of influencer and creator marketing and start inserting affiliate codes into their TV ad buys.
While it may initially sound outlandish, this approach would address two main problems. First, the lack of attribution. For the first time, TV advertisers would be able to see who clicks through, for lack of a better term. They could combine this engagement data with other sources to gain a better understanding of their customers, just like digital marketers have long been able to do.
This proposal will naturally invite pushback, with many inevitably feeling that this approach is “beneath” the hallowed status of TV, which enjoys a somewhat reverential status among viewers, advertisers, and creatives. It’s by no means perfect. But it delivers something marketers actually need to work effectively: data. Data to see which campaigns work and which don’t, and to infer the tactics and styles that resonate most with audiences. The ability to get an actual ROI/RoAS number, giving marketers much-needed leverage in ad-buy negotiations with networks. Data that’s immediate and actionable, allowing marketers to adjust campaigns without having to wait for sales figures or Nielsen metrics.
This is, of course, just one idea for one niche. And, as pointed out earlier, TV isn’t the sole advertising medium that’s in trouble. Digital has its troubles, too. And so there’s a real urgency to create a new playbook that works for the realities of 2023, from the demographic shifts between content channels to changing media consumption habits. The quicker we do this, the better for everyone—from brands to creatives, marketers to audiences.
Chris Gadek is the VP of growth at AdQuick, a company that seamlessly connects advertisers to out-of-home media owners anywhere in the U.S. and abroad.
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