US TV Ad Spend and Influence (Updated – Q3 2013 Data)

KantarMedia-US-TV-Ad-Spend-Growth-Rate-Vs-Average-Q12011-Q32013[Editor's Note: This article has been expanded into a new MarketingCharts Debrief released in August 2014 that offers data-driven insights into the evolving TV industry, examining viewing behavior, ad spending trends, and TV's impact as an advertising medium.] TV is the largest ad spending medium in the US and continues to remain relatively immune to the growth of online advertising. What’s more, TV ad spending remains healthy even as the medium appears to have reached a plateau in audience numbers. This article provides updated charts and research pertaining to: TV ad spending in relation to its audience; TV’s influence as an advertising medium; the TV segments that are growing most rapidly; and projected TV ad spending growth rates through 2017.

Note: The Kantar Media figures provided below (unless noted) were tabulated on a consistent like-for-like basis that controls for changes in monitoring coverage. Figures are therefore directly comparable across every time period.

TV ad spending continues to act as somewhat of a bellwether for the advertising market at large, given its size. For the most part during the past couple of years, TV advertising growth rates have tended to exceed the overall market, at least according to Kantar Media figures, although TV is particularly susceptible to seasonal trends and the impact of Political and Olympic (P&O) dollars. That’s why in this past quarter (Q3), TV ad spend was down 6.3% year-over-year – as it was compared to last year’s ramping up of P&O spending. (TV ad spend during Q3 last year was up by 15.3% year-over-year.) It comes as little surprise, given TV’s year-over-year decline, that total US advertising expenditures were down 1.9% for the quarter this year.

In fact, Q3 marked the first year-over-year decline in TV ad spending since the second quarter of 2011, and the first time since then that TV’s growth rate trailed the ad market’s as a whole. It’s true that TV’s growth relative to overall ad spend could be overstated, as the overall rates are being dragged down by print declines. In a way, though, that also emphasizes how TV advertising has for now been able to withstand the digital onslaught that has contributed to plummeting print spend.

There are some important caveats to these figures, though. The Kantar Media data includes only display advertising in its analysis of online ad growth, also excluding video and mobile advertising from its display figures. As a result, to take H1 as an example, the online portion of overall ad spend ended up contributing 4.1% growth to the equation, while online ad spend estimates from the IAB and other researchers have been far more positive (in the double-digits).

TV as the Largest Advertising Medium

PwC-US-Ad-Media-Market-Sizes-2012-v-2017-jul2013Whether or not TV’s spending growth is outpacing or lagging the overall market, TV’s growth rates appear to be healthy given its maturity and size as an advertising medium. A recent report from PricewaterhouseCoopers (PwC) examined the entertainment and media markets in the US, and data provided to MarketingCharts by the researchers confirms that TV currently remains easily the largest advertising medium in the US. (No huge surprises there.) Last year, PwC estimated that advertisers spent $63.8 billion on TV, about 75% more than they did on online ads and more than they did on all other traditional media combined. Unlike other traditional media, the researchers also forecast TV to see healthy growth through 2017, whereas many other traditional media markets are growing slowly or declining.

Ad Revenues Grow Despite Stagnant Reach

Leaving other media out of the equation for the moment, research shows that TV ad spending continues to rise even as audience size remains flat or declining, speaking to the value advertisers continue to place on TV commercials. Indeed, a comparison of Kantar Media spending figures with Nielsen audience estimates reveals that TV ad spending growth continues to be relatively solid (with the exception of the Q3 decline) amidst an apparent saturation in audience size. The size of the TV-viewing population (Americans aged 2 years and older) appears to be recovering, but has remained mostly stagnant for almost 2 years. TV consumption rates seem to be remaining fairly flat, too. Overall, traditional TV viewing time is inching up, though there are stark demographic differences at play: the oldest segments continue to increase their viewing time, while younger segments are slowly turning away from traditional TV and upping their consumption of online video. (See here for an in-depth look at TV consumption rates for youth.)

TV Advertising: Problems and Opportunities

There’s no question that the way TV content is being consumed is evolving – and that this has implications for advertisers. Does increased use of DVRs mean that people are watching less ads? What about mobile phones – are they an added distraction as consumers multitask? Can social TV provide a brace against the forces moving against traditional TV? The following are some intriguing data points concerning these topics:

  • 7 in 10 TV households in the US have a DVR, subscribe to Netflix, or use video-on-demand (VOD) from a cable or telco provider. (Leichtman Research Group)
  • Social TV could act as a buffer against declining ratings: more TV viewers are not only posting about their viewing habits on social networks, but also choosing to watch particular programs on account of the buzz they’re getting on social networks. (DigitalSmiths)
  • Also, dual-screeners are starting to engage more in activities related to – rather than unrelated to – the programs they’re watching. (Multimedia Research Group)
  • Does dual-screening detract from advertising? Among people who use their mobile devices in front of the TV, about one-third of TV ad viewing time is spent looking at their devices. (Council for Research Excellence)
  • Don’t blame social TV for ad distraction! There doesn’t appear to be spike in tweeting activity about TV programs during ad breaks. (Nielsen)
  • About 1 in 5 marketers claim to have used used Twitter in conjunction with a TV campaign. (Ad Age / RBC Capital Markets)

TV’s Influence as an Advertising Medium

Nielsen-Most-Influential-Forms-of-Advertising-Sept2013If the preponderance of research is to be trusted, TV is among the most influential and most favored advertising media – if not the most highly rated. Following is a select list of studies touting TV advertising’s influence (most confined to the US).

  • TV advertising is the top way in which Americans learn about new products and brands. (Ipsos, July 2013)
  • TV is the top advertising medium for reaching affluent adults, and is rated one of the most effective by luxury buyers. (Shullman Research Center, June 2013)
  • College students are less likely to avoid TV ads than a variety of online ad types, such as ads on social media sites, pre-roll ads, and pop-up or banner ads. (re:fuel, June 2013)
  • Multiscreen consumers are more open to advertising on TV than on computers, tablets, gaming consoles, and mobile phones. (Microsoft Advertising, March 2013)
  • TV is the dominant driver of word-of-mouth, both online and offline. (Ad Age, Feb. 2013; Thinkbox, March 2013)
  • 2 in 3 consumers find TV commercials to be more effective than online advertising – although only half of marketers agree. (Adobe, Oct. 2012)
  • Affluents are more receptive to TV ads than to any other traditional ad types. (Ipsos. Sept. 2012)
  • Local TV is the primary driver throughout the purchase funnel, from awareness through purchase.(TVB, Sept. 2012)

In June of last year, a TVB survey found that when asked the advertising medium they find most influential in making a purchase decision, 37.2% of American adults singled out TV – almost quadruple the proportion who pointed to the nearest competitor, newspapers (10.6%). In addition, TV’s influence held true across all age groups, and was in fact highest among the 18-34-year-old set. Indeed, despite older consumers watching more TV on average, TV’s purchase influence appeared to wane with age, although it still far outpaced newspapers among those over 65 (32.7% vs. 18.5%).

Skeptics might point to those results as having come from an industry body, yet a survey released a couple of months earlier – from a more “independent” source (ExactTarget) – found similar results. Limiting the respondent pool to online consumers, the study found 53% saying a TV ad had influenced them to purchase a product or service in the past 12 months. The next-closest medium, newspapers, was a purchase driver for just 32%. Of note, the ExactTarget study also found TV’s influence highest among younger consumers, and lessening with age.

One reason for TV’s influence on product purchases could be the trust that consumers place in these ads. And on this front, TV scores highly, per recent Nielsen research. Interestingly, among online consumers around the globe, TV ads are trusted by 62%, leading all paid media, with TV program product placements behind but also solid – at 55% of online consumers. To put this in perspective, this means that online consumers are more trusting of TV ads than ads served in search engines results, online video ads, ads on social networks, and online banner ads, to name but a few.

Of course, not all research is positive about TV advertising – and in fact, most marketers believe that smartphones and tablets will be more important advertising screens than TVs in the near future. Many studies question TV’s influence: few B2B marketers, for example, rate TV as an effective medium for reaching customers and prospects. Consumers appear to be watching TV ads out of passivity, and many would like their TV viewing future to be free of ads. Most global marketers feel that online video offers better consumer engagement opportunities than TV, and a recent survey found some ad agencies to be souring on TV.

Looking Ahead: TV Ad Spend to Remain Healthy

US-TV-Ad-Spend-Tracked-Annually-2009-2017-jul2013 Using publicly released figures from Nielsen, Kantar Media, and PricewaterhouseCoopers (PwC), the chart above compares reported TV ad spending growth rates in the US with overall entertainment and media ad spend for 2009 through 2013, as well as PwC forecasts for TV and overall growth rates reaching out until 2017.

As with the non-public data provided by Kantar Media, the comparison finds that from 2009 through 2012, TV ad spend growth rates generally outperformed overall growth rates for the media and entertainment (M&E) sector, with 2011 appearing to be the exception. That may be due to the political and Olympic effect being more pronounced on TV than other advertising formats, such that odd years tend to bring about weaker growth rates for TV than other media. (The segments included in the PwC data for overall media (excluding TV) are: trade magazines; consumer magazine publishing; filmed entertainment; internet advertising; newspaper publishing; out-of-home advertising; and radio.)

Looking ahead (and using 2013 constant dollars), the PwC forecast sees less of a biennial swing, with TV continuing to outpace the aggregate growth rates of other advertising media through 2016 before falling behind in 2017. It’s worth noting again that the “overall” figures include internet advertising, which is already the second-largest advertising medium and is rising quickly, pulling up the average of all those media. While TV – a mature medium – can’t support those kinds of growth rates, it fares much better against other traditional media, and its healthy growth rates should see it continue to maintain its leading share of the advertising market for the foreseeable future. All told, PwC predicts a compound annual growth rate for TV advertising of 5.1% for 2013-2017.