This Blog describes the budget shift from TV ads to digital ads across almost all the sectors, the reasons why this shift is occurring, measurability and targeting, and provides marketers with tools to help re-balance their media mix. This article attempts to explain the digital ads first investment shift for most brands, by using evidence and cost-benefit analysis. This article attempts to do this with a clear lens. This article does not attempt to explain the death of TV.
The Scale of the Shift
For a long time, the only medium that could reach a mass audience was TV. For a long time this was the dominant, and unrivalled medium. This has significantly changed with the introduction of streaming services, on-demand content, and mobile-first consumption. Digital ad spend has surpassed TV in most of the major markets and continues to do so. Digital ads are the primary choice for most brands. When TV is used, it is a brand awareness support tool, as opposed to a central part of the media strategy.
Compared to TV, digital ad spend is more cost-efficient. This is especially true for smaller brands that have restricted advertising budgets. Digital ads solve two problems that TV cannot. These are measurement of the ads and targeting the desired audience. This shift is not a transient trend. This change is primarily structural and centered around these.
It's important to know that this change spans industries and business sizes. Large CPG companies used to market with only big, time-slot purchases with National TV. Those companies now have many digital campaigns that are always on and use time-slot purchases for big digital campaigns that are done nationally. On the other end of the spectrum are local and DTC companies. They have historically never been able to use TV advertising. Now, they are able to build their customer base, and even compete, using only digital advertising. This is because digital channels allow for better targeting. This means the companies that historically relied on TV advertising, due to their large outreach, have less of an advantage. The targeting of the digital channels has reduced the outreach advantage of the mass-Retail TV advertising. Because of all this, digital advertising costs keep going up, even when there are less companies using the digital advertising.
Gaps in Measurement and Targeting in Television Advertising
Challenges of Measurement
Rating systems that use a small sample of the population mean that advertising in television continues to rely on estimated reach or guesswork. The systems provide a rough understanding of how many people had a television set showing a specific channel at a specific period of time, but they do not answer the crucial question of whether any of the potential viewers saw, engaged with, or responded to the television advertisement. There is no way of knowing the impact of a television advertisement on an individual, be it an advertisement, a web visit, or an engagement with an application. The impact is measured, at best, by large and imprecise brand-lift studies, or alternatively, by an investigation of trends in sales during and after the campaign, which is a time- and resource-consuming exercise that yields no conclusive evidence.
Lack of Targeting
Broadcasters offer a limited selection of television programs, which makes targeting more difficult. For example, to reach a male audience, a broadcaster may select a sports program, while an advertisement targeting a senior audience may be placed during a daytime program. In most cases, the target audience is more of a guess. This is in contras to the digital world, where targeting is less vague. For example, advertisers can select specific audiences based on purchase intent and browsing behavior, and even exclude people who have already converted. As a result, advertising on television become a costly exercise to show a specific advertisement to a large number of people who have no relationship to the advertisement.
High Fixed Costs and Long Production Cycles
Television ads are different from other forms of media in that they have their own specific costs. The biggest cost for television ads (in addition to media buying costs) is the long-term investment needed to produce a professional-quality commercial. This profession takes time to plan, film and approve. The result is a lack of ability to respond to rapidly shifting demands in the market, notable moments in culture, or changes in competition. By the time your television ad campaign is built, you have likely missed the opportunity. In contrast, creative assets for digital media can be built and go live in a matter of days.
Digital Advantage: Measurable and Targetable
Every Ad Engagement is Accountable
When it comes to digital media, there is a wealth of reporting. Digital media allows granular reporting to the impression level. Brands can track every metric from cost-per-acquisition (and how that acquisition is defined) all the way to the purchase, download, or conversion. This helps marketers understand their true return on ad spend and not have to guess through brand lift studies. Along those lines, digital media can be turned off if it is sub-performing in a matter of hours as opposed to waiting weeks and months for a television media flight to be over.
Targeting Capabilities
Advertisers on digital platforms can segment and target audiences based on a variety of criteria, from demographics and interests to past purchasing activity and web usage history. Advertisers can even create lookalike segments based on their existing customer base. Programmatic advertising further refines audience targeting by using automated, data based bidding to serve specific ads to specific users likely to convert, on any of the thousands of sites and apps. This allows for advertising dollars to be better allocated to the audience segments most likely to respond to the messaging versus a broadcast audience, which likely contains a lot of individuals who wouldn't be relevant to the advertisement. Digital marketing also allows for ads to be served to users who have previously engaged with the brand or visited the brand's web page, and this is not an available capability in television advertising. Of all the digital marketing capabilities, this tends to yield the most conversions.
Greater Accessibility
The cost of a digital campaign can be a few thousand rupees, a price that makes advertising feasible for companies that cannot afford the cost of television advertising. Coupled with the lower cost, the digital advertising can be adjusted and optimized in real time based on performance, unlike television advertising, which is locked in once purchased.
A Useful Guide for Rebalancing Media Budgets
- Compare Spend to Outcomes Indirect of Reach
Marketers should match television and digital media spend to business outcomes (i.e., leads, sales, app installs, foot traffic) before making any budget changes. Spending reach and impressions will show that a significant portion of the TV budget exists strictly for brand awareness and cannot be attributed to a specific outcome. While brand awareness is a valid goal, budget and assess digital spend against performance separately.
- Use Digital for Performance and TV for Brand (If Necessary)
The most effective media plans distinguish spend based on the objective. Digital media are best positioned to drive performance due to the relative ease and certainty of measuring and tracking digital media outcome and ROI. Spending $$ on TV for brand awareness building campaigns is fine if budgeted and is assessed against brand-lift outcomes as the digital media will not have the same performance ROI.
- Start Small, Test, Scale
Digital media have a unique structural advantage of the ability to test at a low, quick to market cost. Small tests can be run, and the missing performance can be scaled. This test and scale approach cannot be used for TV and out of home media as the costs to create a campaign are significantly higher.
- Construct Attributing Systems prior to Increasing Investment
The benefit of digital marketing is being able to measure its success, but this is only the case when companies implement tracking, from site analytics to conversion tracking, to building attribution frameworks. Digital marketing makes sense only when companies implement tracking and attribution systems, especially companies that are shifting budgets from TV to Digital.
A Case Example
Take a look at a retail company that previously put the bulk of their marketing budget toward one seasonal TV ad each year. This company would see their sales go up during the season when the ad would run, but they had no way of knowing if the sales came from the TV ad, or from customers in the store, or even from people talking about the store. This company began to allocate their budget to Digital Ads over the course of two years. This began with Digital Ads of people who had already visited the site and people who were similar to the company’s customers. This company began tracking digital conversions and was then able to see which Digital Ads were allowing them to make sales and began to Target the segments of audiences that were the most successful. The Ads that remained on TV were for creating the company’s brand awareness and were much shorter, focusing only on brand awareness, and were meant to be evaluated by brand recall instead of sales. This was a much more accurate and helpful way to determine what the TV ad budget was allowing the company to achieve.
Common Mistakes When Changing Tactics
The ways brands lose their budget from TV to digital often fall along the same lines. The first mistake is doing the shift without the proper tools set up, causing a brand to lose the ability to compare TV spend versus digital spend, and therefore the ability to explain the shift to their superiors. The second is keeping a TV mindset with digital creative. This produces a creative that is static for a long period of time instead of using the mutable nature of digital to produce many strategies. The third is losing TV budget and assuming that digital retargeting can sustain top of the funnel growth, which is a flawed assumption. Retargeting will only engage audiences that are aware of the brand. Therefore, a budget is necessary for top of funnel digital spend like social and display, to continue to build the audience for these strategies.
The last mistake is focusing too heavily on last-click, which can greatly underrepresent the value of many of the other channels. When looking at different budget scenarios, brands should try to use many of the available channels. At a bare minimum, last-click should not be relied on too heavily.
Deciding How Much Budget To Shift And At What Speed
There isn’t a standard ratio for all brands to work from, due to your average order value, sales cycle, category, and how much of the journey is done online. That being said, a gradual, cautious shift, is more effective than a rapid shift. To lessen the risk of a potential loss to brand building through TV, an initial test of shifting 15-25% of a TV budget is best. Brand safety is to keep measuring the performance for the full sales cycle and then shift the budget further based on the results. Also, in a few budget cycles, most brands do find their digital budget keeps building, due to a higher confidence in the new metrics, and a higher trust in the new sales and marketing reporting.
The Bottom Line
It's not that digital ads are 'in' and TV is 'out' or that TV is going the way of the dodo. It's about accountability. Compared to TV, digital ads give marketers the unparalleled advantage of crystal-clear insights about which audiences saw their ads, what actions they took, and how much they (the marketers) paid for this process. As the pressure on marketing budgets grows, channels that can document quantifiable results will gain a larger share of budgets compared to channels that can only provide rough estimates. Brands that construct their media strategies using digital channels for quantifiable results and TV for low-cost, non-measurable brand awareness, are likely to achieve superior results. This is true of brands that continue to invest using budgets focused on advertising 'traditions' versus advertising 'realities'.
Ready to Rebuild a Media Mix That Proves Its ROI?
Acadvizen works with brands to optimize their ad spend, build effective attribution systems, and create digital ads that actually deliver results. Contact us to build a media budget that actually delivers results.
Frequently Asked Questions
Q: Why are brands shifting ad budgets from TV to digital?
A: The digital ad model allows brands to create targeted ads and track metrics via near instantaneous feedback, something the broadcast model of television entails a high degree of wasted reach to relatively few actionable metrics. Given the heightened focus on marketing budgets and ROI, the ad channels that deliver measurable results capture the largest share of expenditures.
Q: Is TV advertising going out of style?
A: TV can reach mass audiences and work toward brand awareness, so TV advertising isn't going out of style. However, it is becoming a secondary channel in advertising plans because it becomes difficult to justify TV advertising against the advertising methods that have more measurable results, such as Digital.
Q: What is programmatic advertising and how does it improve targeting?
A: Programmatic advertising is a method of advertising that focuses on the audience segment that a business is trying to convert. This method uses computer systems to bid for advertising space in an automated manner. This method is an improvement because it allows the business to focus its resources on the audience segment that is most likely to convert.
Q: How can a brand measure ROI on a TV campaign?
A: Because there is no method to measure how a TV viewer takes action after seeing the advertisement, advertising studies, viewership studies, and sales studies can be done to help estimate the ROI on an advertisement campaign.
Q: Should small businesses even be spending on TV advertising?
A: Small businesses are typically better off spending on Digital advertising. Digital advertising is an improvement to TV advertising because Digital advertising allows a small business to spend a small amount of resources on advertising that can be measured and optimized, whereas TV advertising is the opposite.
