Buying Time
Advertisers think twice, look for better return on investment
By Joe Mandese -- Broadcasting & Cable, 10/17/2004 8:00:00 PM
There will still be commercials every 12 minutes or so for a long time to come. But the agencies buying spots are beginning to think the television advertising model is a waste of time and money.
"They're beginning to lose confidence in the medium," confides Ray Warren, managing director of OMD USA, the largest TV buying agency in North America, about his peers in the ad business. Rapid acceleration of new technologies such as digital video recorders and video-on-demand, coupled with questionable audience-research practices, have marketers fundamentally rethinking the way they look at TV as a part of their advertising mix.
Still, television advertising spending continues to rise—but that's mainly because new categories of advertisers are filling the time with commercials for products or services that either didn't exist before or didn't advertise.
That's found money that won't always be there.
B&C's ranking of the top 10 TV buyers of 2003 comes as the advertising industry and clients are asking pointed questions about the efficiency of TV advertising and the measurements of success. And expectations are changing as fast as the technology itself.
The acceleration of TiVo-like DVRs is an advertising time bomb. In fact, a Zenith Optimedia report estimates that, even under the relatively modest current DVR penetration of only 3.5 million U.S. TV households, users are already zapping about 2% of all commercials.
But it's more than just TiVo. Advertising plans once began with devising a TV campaign and then filled in around it. That's changing.
"In the old days, we were told what we were going to buy based on the creative strategy," explains Rino Scanzoni, chief investment officer of Mediaedge:cia, a WPP Group unit that currently spends more than $2 billion on TV advertising buys. "Now we're being brought in to develop a communications plan that will engage [a client's] consumers. If radio is going to do that, we'll buy radio. If it's a mix of radio with the Internet, that's what we will do."
Advertisers and their agents want to know what they're getting and what to expect. "It's all about accountability and ROI," says Warren, using the acronym (for return on investment) that has become Madison Avenue's media-planning mantra.
How to actually define ROI may be another matter entirely. "Does it mean that you want to make sure your spots have actually run?" Warren asks. "Or does it mean that you want to show that your sales have gone up? Of course, it's both of those things. And in the end, it's our job to make sure advertising works."
While few would argue that advertising—especially television advertising—doesn't work, the medium is under acute pressure from major marketers. They're shifting away from the classic "reach"-based approach of media planning, in which buys are prized for delivering as many consumer eyeballs or eardrums as possible. In the new world, "communications planning" seeks to "engage" and motivate consumers to actually do something—presumably, to buy the products.
Nowhere was that point brought home more dramatically than in Procter & Gamble's decision to review its media-planning account and transform it into a "communications-planning" assignment that eventually was split between Starcom MediaVest Group and Carat. With that move, P&G, the nation's largest advertiser, told the world it was abandoning the status quo of conventional media planning.
While it's still too early to understand exactly how P&G will shift its media strategy, the marketer has said that an important part of the change is to wean itself off the kind of cookie-cutter media plans that begin with TV as their base.
But as the P&G move indicates, the underlying metrics of TV media plans are changing: The business won't be about how many viewers saw the commercial but about how many consumers bought the product.
"We're talking about engagement," says John Muszynski, who has deliberately imbedded the e-word into his official title: executive vice president and managing director of investment operations engagement for Starcom, an agency that spends more than $2.7 billion on TV.
TV's not out of the picture altogether, not by a long shot. "Despite all the nontraditional media spending and all the talk about communications planning, broadcast venues remain strong, and network television within that," declares Andy Donchin, executive vice president and director of national broadcast at Carat. "Reports of the death of network television have been greatly exaggerated."
Media buyers say demand continues to build from new brands and advertisers, some in entirely new categories, like most pharmaceuticals. The number of brands using television jumped to 32,313 in 2002, the most recent year measured by the Television Bureau of Advertising, up from only 11,086 in 1992. The number of advertisers buying TV during that same period jumped to 5,836 from 2,019.
"I look at my budgets in the television world over the past couple of years, and I can tell you, without a doubt, they are not up. Yet the industry as a whole is up," says Starcom's Muszynski. "What's driving this is new advertisers, new brands and new categories that have come into the marketplace."
So even as so-called "alpha" marketers like Procter & Gamble and Mitsubishi rethink their TV advertising mixes, enough newer and emerging brands are demanding TV time to more than make up for the cutbacks by majors like American Express, which now has only 30% of its ad budget in TV, down from 80% five years ago.
But those decisions to cut back, or at least rethink, TV spending shouldn't be lost on buyers, sellers or advertisers.
Lately, OMD's Warren, whose clients include Apple Computer, General Electric, McDonald's and Visa, has adopted a sarcastic new slogan for thinking about the future of the TV ad business, where he spends over $5 billion a year. "Change is not necessary," says Warren dryly. "Survival is not mandatory."
His ominous meaning: Television and advertisers don't have to change; they will just go out of business.
Buyers are putting their money elsewhere, to be sure. Muszynski and his Starcom colleagues have placed millions of dollars in broadband video ad buys on MSN, Yahoo! and Feedroom.com and have been encouraging other Internet providers to develop broadband video programming.
Muszynski likens the current shift to the early days of cable TV: "The only difference is that broadband is much more effective at delivering us some kind of measurement for what we got, and it's also much more targeted than cable is."
Buyer restlessness is just starting, these executives believe. Advertisers are changing marketing strategies because, Muszynski notes, "consumers have more choice and more control than ever before."
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