Trebles all round! TV’s reasons to be cheerful

TV ad revenues hit an all-time high last year and the medium is attracting hundreds of new brands – which is pretty staggering given the plethora of choice available to advertisers these days, writes Dominic Mills.

Jeroboams of bling champagne; Flaming Ferraris; crates of luscious Bordeaux. I bet the bars of Soho and Covent Garden were awash with booze at the end of last week.

The reason: TV sales teams celebrating a bonanza year, according to the latest industry figures put out by Thinkbox last Friday.

They showed revenue hitting an all-time high of £4.63 billion, up 3.5 per cent, and rising for the fourth year running. And all in a year without an Olympics or a footie tournament.

Better still, 2014 looks like we are on a rising tide. There’s the World Cup, of course, and the Ad Association and Warc are predicting a rise of 6 per cent this year.

As if that wasn’t enough, broadcasters like Channel 4 will be raising a glass to BBC boss Tony Hall. His decision to axe BBC 3 (or, strictly speaking turn it into an online-only vehicle) will push youth audiences their way.

I dare say, too, that the new kids on the block, London Live, will be breathing a sigh of relief too. The bulk of their programming targets the metropolitan youth and young people’s market, aged 16-34, so beloved of advertisers.

Of course, one man who won’t be out celebrating is Google chairman Eric Schmidt, who last year boldly – and some might say foolishly – predicted the death of mainstream TV.

Amid the glut of good news, two things stood out. One is the figure, lovingly curated by Thinkbox, which showed that the list of advertisers last year new or returning to TV after five years, totalled 737 and accounted for 2 per cent of total spend.

That is pretty staggering, all the more so given the plethora of choice available to advertisers these days – a choice that has significantly increased over the last five years.

The second is that the price of TV advertising has fallen in real terms and is now both lower than ever and 38.5 per cent cheaper than 20 years ago.

Perhaps a certain Mr George Osborne might raise his glass to that, because one can make a good case to link the health of the TV advertising market to that of the economy as a whole.

Serious economists – commissioned by Thinkbox or the Advertising Association – could no doubt demonstrate the positive effect easy access to TV advertising has on a company’s prospects and its ability to generate revenue.

Is the fact that so many new advertisers are coming to TV linked to its real-term decline in price? I can’t prove it, but I bet that – along with the cheaper production costs new technology allows – low prices are a factor.

Certainly, the opposite is true: that high TV costs can be a significant barrier to entry for many companies, and thus locks them into a low-growth cycle.

Many years ago, when advertiser choice was limited to the triumvirate of ITV, Channel 4 and Sky, Paul Polman, then running Procter & Gamble in the UK (and now CEO of Unilever), told me that high TV prices were a significant disincentive to the company’s willingness to launch new products – and thus, if replicated across other sectors, a potential drag on innovation and overall economic activity.

I paraphrase, but the gist of what he told me was this:
– Launching new products is both risky and expensive;
– TV costs were a significant factor in overall launch costs;
– If they remained too high, P&G would launch products in lower-cost TV regimes (i.e. other parts of Europe, or possibly some emerging market economies);
– And the overall effect, while being negative for P&G UK, would also hurt the UK economy.

So there’s an interesting question to be answered: to what extent has the decline in TV costs contributed to the UK’s GDP growth? A fair bit, I’d say.

Of course, you don’t have to be an economist to understand that one reason costs have fallen is that supply of TV minutage and sponsorship opportunities has increased: more channels broadcasting more hours equals more supply.

So there’s another interesting question or two to be asked.

One, is there a point at which rising demand will reverse the downward trend in prices?

And two, is there a price point at which certain channels will have to close because they can’t charge enough for their spots?

Moneysupermarket, you’re so data-tastic

News last week that Moneysupermarket.com is expecting to earn £10 million a year from selling its data to insurance companies, utilities and financial services providers offers one of those moments when you wonder: ok, so how do I define a business like that?

Interestingly, the Financial Times reported the story under its media categorisation, suggesting that, while consumers may think of it as a straightforward price comparison site, it is in reality in a whole other business category altogether.

The FT is right: data is a media business these days and Moneysupermarket, given all the content it produces, is really like a media owner delivering an audience to advertisers.

But it’s the story of our age. Digital, and data, mean old business categories are redundant. At what point, for example, do we stop thinking of Tesco (Blinkbox, Tesco TV, music streaming, etc.) as a supermarket and as something else?

If there is a surprise, it’s that Moneysupermarket is targeting a relatively small sum from data. Given that it touches something like 20 million customers, and has data on 14 million households and 15 million car owners, there’s an awful lot of customer-journey gold to be mined from those seams.

The tragedy is that many of its potential clients won’t know what to do with all that data, or certainly won’t maximise it.

There are two other points to note: one is that its chief executive, Peter Plumb, is ex-Dunn Humby, so no doubt many of the tricks he learnt working on Tesco Clubcard will come into play.

The second is that media agencies will probably be beating a path to its door. Imagine what they could do with that information – providing, of course, they have the ability to make sense of it