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

by MarketingCharts staff
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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.

The impact of P&O dollars on TV ad spending is particularly apparent when looking at various segments of TV advertising: TV media spending was dragged down by a 17.9% decline in network TV spending and a 15% drop in spot TV, with both suffering from comparisons to P&O spending last year. Other segments such as Spanish-language TV (up 9.9% in Q3) are relatively more immune to those dollars and continue to show healthy growth rates (more on that below), while marketers appear to be bullish about cable TV.

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 – with TV favored over online video mainly due to its greater reach. (An analysis of TV versus online video consumption can be found here.)

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). That may be why recent figures (as reported here by MediaDailyNews) from Standard Media Index, which looks at actual data from the processing systems of 4 of the 6 major agency holding companies, found TV ad spending growth through November of this year to lag the increase in overall media outlays (3% vs. 7%), with digital spending increases much larger. Though the figures may vary – most research expects that TV ad spending will continue to grow. Perhaps Facebook’s effort to grab TV dollars will make a dent?

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

US-TV-Ad-Spend-vs-Audience-Growth-Rates-Q1-2011-Q3-2013Leaving 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. (A separate MarketingCharts analysis suggests that advertisers are spending roughly $225 per year on each TV viewer, versus $144 to reach each online user.) 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.) It’s also worth noting that the number of TV homes has increased, according to the latest Nielsen list of DMAs.

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)
  • DVR usage could be a problem for advertisers: one 30-minute program studied found that DVR users watched only about 23 minutes on average, compared to 28 minutes for video-on-demand (VOD) users. Greater viewing time among VOD users likely owes to them not being able to fast-forward; the results do indicate that DVR users are fast-forwarding through commercials. (Nielsen)
  • 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)
  • TV on in the background? Might not be such a problem – “the emotional pattern that a TV commercial elicits in the consumer’s brain is reactivated upon hearing only the audio of the TV commercial.” (Mindshare – quote from MediaPost reporting.)
  • 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-Sept2013So why do advertisers keep pouring money into TV, even amidst the rise of everything digital, and even as audience numbers plateau? If 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), in reverse chronological order.

  • Mobile users across 8 countries including the US rank TV ads (81%) as the marketing messages they are most likely to engage with. (mBlox / Millward Brown, Sept. 2013)
  • TV is more effective than digital advertising at bringing in new customers, although digital is better at securing sales from existing customers. (TiVo Research and Analytics, Sept. 2013)
  • TV advertising is the top way in which Americans learn about new products and brands. (Ipsos, July 2013)
  • 6 in 10 TV viewers say they would act on a TV commercial, although the remainder claim they would “never” do so. (Viamedia, 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)
  • TV is rated the most effective advertising channel by SMBs. (Vocus, Feb. 2013)
  • 51% of smartphone and tablet users around the world (including the US) say they have a very or somewhat favorable attitude towards TV ads, on par with radio, and ahead of all other traditional and digital media. (Millward Brown, Nov. 2012)
  • 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.

The effect of TV advertising on youth is also brought into focus when looking at college students. A survey released last year by Barnes & Noble College Marketing discovered that despite the popularity of digital technology and media among college students, a leading 42% named TV ads the most effective form of advertising, more than double the proportion (20%) who said that ads don’t impact their purchase decisions, and far outstripping the next-most effective advertising medium, magazines (10%).

Not only do TV ads seem to be effective, but they also appear a viable way to reach this demographic. TV commercials ranked as one of the top ways for a company or brand to reach students: 19% of respondents chose TV, slightly behind email (20%), but ahead of coupons (14%), Facebook ads (9%) and on-campus word-of-mouth (9%). Nielsen-Trust-in-Advertising-Sept2013

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. A Nielsen report recommended that advertisers move 15% of their TV budgets to online video, using results showing that ads viewed during TV shows were more effective when viewed online than on a traditional TV set. A Software Advice study found traditional media – including TV – to be fairly ineffective in generating B2B leads, even as a separate analysis from BtoBonline.com revealed that TV ads constitute the biggest ad spend for B2B companies. Additionally, research has shown that TV ads don’t spur many shoppers to try new retailers, are middle of the pack as an influence on household shoppers, and while they contribute to mobile purchases, have less of an impact than online content for driving mobile commerce, per an Interpret study, reported by MobileMarketer.

Growth Segment: Spanish-Language TV

US-TV-Ad-Spend-Growth-Rate-by-Segment-2011-Q32013Still, advertisers obviously continue to see the value of advertising on TV. But some segments are seeing greater demand than others.

An analysis of Nielsen data and publicly released Kantar Media figures indicates that while Spanish-language TV accounted for only 5.9% of total expenditures in 2011, this overall segment has generally grown more rapidly than TV media overall for several quarters now.

During 2011, Spanish-language TV spending grew by 8.3% year-over-year, compared to 2.4% growth for TV media overall. In 2012, that trend continued with Spanish-language TV revenues jumping by 15% compared to the overall figure of 8%. And through the first three quarters of this year, Spanish-language TV spending increased has increased by 9.6% even as overall TV spend has remained mostly flat (+0.1%).

In fact, US advertiser spending in almost all traditional media targeted at Hispanic audiences (Spanish advertising mediums) has been increasing, reflecting the potential of this young and growing market, which is forecast to reach $1.5 trillion in buying power by 2015, according to an April 2012 report from Nielsen. TV spending (Spanish network, spot, and cable TV combined) accounted for 76.5% share of all traditional media spend directed towards Hispanic audiences in 2011. Among the TV segments, Spanish cable TV (7.9% of Hispanic ad spend on traditional media) grew the fastest, at 21%, followed by Spanish network TV (57% of spend), which grew by 13%, and Spanish spot TV (20% of spend), which grew by 1%. Nielsen-Latina-TV-Viewing-Trends-2013-v-2003-Aug2013

Sending ad dollars to Spanish-language media appears to be a wise way to target Hispanic consumers: data from a recent Nielsen study indicates that Hispanic women’s brand recall is twice as high in Spanish as English TV. The researcher attributed the increased brand recall not necessarily to language, but to the heightened relevance of the content and advertising found on Spanish-language TV. That same report illustrated just how engaging the Hispanic population finds Hispanic-language TV: Latinas were found to be spending twice as much time watching Spanish-language as English broadcast TV. Indeed, Rentrak data consistently finds Spanish-language broadcast channels to be among the most engaging for their time slots (example here).

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.