Credit Suisse: The Future of TV Advertising is Below-the-Line!

TV is Poised for Greater GrowthEmbarking on a full analysis of the future TV media market Sheikh started with the question What is the basis of competition between the advertising product offered by all of the media and technology platforms out there quotIn the early 20th Century it was reachquot he noted quotThen with the advent of TV it was engagement And since the advent of internet advertising in 1995 it has become relevancequot as media becomes more able to target specific audiencesWith the advancement of technology like machine learning the ability to target audiences becomes even more precise Because digital can make full use of this technology the general consensus is that the growth of digital advertising is projected to be robust by taking share from other budgets Does this come at the expense of linear TV According to Sheikh no and this is where Credit Suisse deviates from the general financial wisdom quotInvestors think that digital growth will inevitably come at the expense of the growth of TVquot he remarked quotWe disagree with this viewquotWhile he projects that digital growth will continue to be strong with projections of 60 in the US by 2030 TV will also grow even if digital share doubles quotIn fact we think that TV ad growth can accelerate from a 2 per annum we have seen over the last three years to 57 between now and 2030quot he shared MyersBizNet39s forecasts agree projecting growth in total digital advertisingmarketing from 1286 billion in 2016 to 2449 billion in 2020 MyersBizNet forecasts broadcast network TV ad spending will increase from 201 billion in 2016 to 225 billion in 2020 cable network ad investments will increase from 284 billion in 2016 to 311 billion in 2020Where will this growth come from Since early in this decade when Myers began forecasting media and marketing budgets he has been tracking a shift from belowtheline promotional budgets to abovetheline advertising budgets driven by digital media and performancebased metrics MyersBizNet39s most recent forecast projected a shift of 63 billion annually from promotional shopper budgets to advertising budgets comparing 2010 to 2020 He has reported that 100 of advertising growth in this decade results from this shift as total marketing budgets are flat and down nearly 15 when factoring inflationMyersBizNet data which incorporates 52 media and marketing categories reports that 35 of total marketing communications spend in 2016 was invested in advertising 2003 billion of a total 5867 billion Credit Suisse data which is less comprehensive than Myers39 argues that spending on all media is about 45 of overall marketing spend The other 55 is spent on belowtheline marketing like price promotion and sponsorshipamp160 Sheikh believes that advertisers can shift their investment from belowtheline to fund growth in digital and other media And with continued innovation in the TV market it will become easier and more precise to target the relevant consumer via dynamic ad insertion and linear TV quotBoth are moving TV into the sweet spot of ad target positioningquot he noted And by combining reach with relevance quotthe ability of the TV product to recapture market share is structurally improvingquot he concluded with targeted linear in particular fueling this growthOpenAP Will Help Facilitate TV GrowthTargeted linear TV advancements like the recently announced OpenAP will help pave the way towards the projected TV growth spurt OpenAP according to Sheikh quotgives advertisers a gateway to advertising on linear televisionquot by enabling advertisers and networks to use data to more narrowly target subsets of relevant consumers in individual shows beyond the Nielsen data quotThis will deliver a much more efficient linear ad feed which reduces the waste in reaching people when the ad is not relevantquot he addedSheikh explained the process by an example of reaching truck buyers Whereas previously the advertiser would purchase on age and demo across a selection of shows on a network the ultimate conversion would be relatively low quotThe same sales goal could be achieved by targeting a much smaller subset of potential truck buyers like current truck owners whose lease is about to expirequot he posited The smaller subset of a highly targeted relevant group of consumers can lead to the same or better sales outcomeTraditionally it was impossible to target such a small group but now with the advancements of technology and the ability to combine first party such as customer lists and third party such as lease expirations combined with syndicated data such as set top box or Nielsen advertisers can buy more efficiently with less waste and networks can maximize the value of their inventory with higher CPMs and fewer makegoodsquotOpenAP enables an advertiser to standardize the definition of their audience across all of the networks of Fox Turner and Viacom so they don39t have to go through the same process three times enabling them to buy a guaranteed narrow target audience rather than a broad gender age Nielsen guaranteequot he concluded While at this time nothing approaches the highly focused narrow targeting of audiences of digital this does enable advertisers to dramatically reduce wasteConclusionFor those investors who may be concerned with the future strength of media stocks the advice from Credit Suisse is don39t be Looking ahead to 2030 inventions like IoT wearables and smart cars will make it increasingly easy to reach and target consumers While this may hurt old time marketing like direct mail and telephone marketing those ad dollars will flow to digital and amp8230 yes amp8230 TV In fact Sheikh believes that quotTV advertising growth will acceleratequot So as for me I am sticking with my media stocks and envisioning a cushy retirementClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this article are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated bloggersamp160

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Credit Suisse: The Future of TV Advertising is Below-the-Line!

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Charlene Weisler

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