Death of TV Advertising?
Roll on 2009 say I. This is the year it is predicted that the UK TV adspend will equal online spend.
The UK is leading the world in home broadband takeup (we BEAT the USA wow!) and if your organisation does any advertising (B2B or B2C) you should be moving online now.
Read the Economist article below (can’t provide a working link as it blocks non-subscribers from premium content which is a practice that reduces the strength of its message online. Rant over).
Adland’s test tube
From The Economist print edition
Britain provides a glimpse of the future of advertising
THE
future, noted William Gibson, a science-fiction writer, is already
here—it is just unevenly distributed. To see the future of mobile
phones, people look to Japan; to see the impact of broadband internet
connections, they look to South Korea. And for a glimpse of the future
of advertising, the place to look appears to be Britain. The country is
a “test bed” according to Eric Schmidt, chief executive of Google,
which has just announced an alliance with British Sky Broadcasting (BSkyB),
a British pay-television company. On December 6th the two companies
announced that the internet search and advertising giant would provide
its search, e-mail, video and advertising services to BSkyB’s broadband internet-service customers, with the aim of extending the partnership to BSkyB’s main television business.
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Why Britain?
The country has several factors in its favour. For a start, the British
online-advertising market is “exploding”, said Mr Schmidt. The internet
accounts for 14% of companies’ total spending on advertising in
Britain, compared with about 5% worldwide (see chart). Expenditure on
internet advertising in America is similar to that in Britain, but
Britain’s growth rates are slightly higher. In the first half of this
year online advertising increased by 40% in Britain and 37% in America
compared with the same period last year, according to the Internet
Advertising Bureau, an industry body. Britain is now the leading market
for online advertising, says Rob Noss, European chief executive of
MindShare Interaction, a new-media subsidiary of WPP, a British advertising giant.
That is due, in part, to the presence of the BBC,
Britain’s state-controlled main broadcaster, which has no advertising.
As a result, British companies spend less on television advertising
than those in countries with big commercial broadcasters, and more on
other types—which, in recent years, has meant online advertising. GroupM, the media-buying division of WPP, forecasts a 2.4% decline in British television advertising in 2006 and a flat market for 2007.
Eventually, says Sir Martin Sorrell, chief executive of WPP,
the internet will grow to account for 20% of worldwide advertising
spending, at the expense of traditional media (broadcast and cable TV,
print, radio and outdoor advertising). But Britain will reach this
point by 2009, predicts ZenithOptimedia, a market-research firm, at
which point internet advertising will be worth almost as much as
television advertising. Britain has, in effect, got a head start over
other countries as advertising spending shifts from old to new media.
Another
catalyst of the growth of online advertising is Britons’ enthusiasm for
fast, always-on broadband connections to the internet and for online
shopping. In Britain 47% of households have broadband, compared with
44% in America and 33% in Germany. Consumers with broadband tend to
shop online more frequently and spend more money than those with slower
dial-up internet connections. In the first six months of this year
online retail-spending in Britain increased by 40% compared with the
same period last year. The attraction of online ads is obvious.
Advertisers
are waking up to the fact that British consumers typically spend a
quarter of their media-consumption time on the internet, says Linus
Gregoriadis, an analyst at E-consultancy.com,
an internet-research firm. Britons spend an average of 23 hours a week
online, compared with 14 hours per week for Americans. Advertisers also
like the efficiency of the medium: much of the advertising on the net
is “pay-per-click”, which means that advertisers pay only when
consumers click on an ad, so they can be relatively confident that
their advertisements are reaching a receptive audience. Mr Noss says
that several of his firm’s clients already spend 40% of their
advertising budgets online.
Blue-chip
companies have yet to take the plunge and still spend only a tiny
fraction of their budgets on internet advertising, but that could be
about to change. Unilever, an Anglo-Dutch consumer-goods giant,
Heineken, Europe’s largest brewer, and Procter &
Gamble, a large consumer-goods company and the biggest advertiser
worldwide, recently announced that they will switch a big chunk of
their British advertising budgets away from television. Much of it will
go online.
Britain is
also attractive to advertisers because it is a homogeneous market, so
there is no need to tailor advertisements for different parts of the
country. The adoption of digital television is proceeding well, and BSkyB’s platform is particularly advanced; Google and BSkyB plan
to send advertisements to viewers’ set-top boxes and then play them in
commercial breaks depending on their interests, thus extending its
targeted advertising model from the internet into television.
And British
consumers’ relative enthusiasm for accessing the internet from mobile
phones—if not in the same league as that of Asian consumers—explains
why Yahoo!, another big internet firm, struck a deal last month with
Vodafone, a big mobile operator based in Britain, to test new models
for phone-based advertising. In addition, next year a new mobile-phone
service for young people, called Blyk, will be launched in Britain
before being rolled out across Europe. Users will be able to earn
airtime in exchange for receiving advertisements on their handsets.
Blyk’s
co-founder, Pekka Ala-Pietila, a former president of Nokia, the world’s
biggest handset-maker, says the firm decided to launch in Britain first
because it is the second-largest advertising market in the world after
America, with sophisticated advertisers who appreciate the market
segmentation that new technology makes possible. As a result, he says,
Britain “is where we could learn the most”. It all makes a welcome
change for Britons used to hearing that their once-great country no
longer leads the world in anything.