TV ads create 71% of advertising-generated profit

Moz the Monster from John Lewis’ 2017 Christmas ad

A new report from Thinkbox, Ebiquity and Gain Theory has found that TV advertising generates the highest return on investment of any media and is the medium most likely to create advertising-generated profit both in the short-term and the long-term.

According to the study – which has for the first time quantified the total profit generated by different forms of advertising to show what they actually deliver to the bottom line – advertising creates a total profit ROI over three years of £3.24 per pound spent.

Within that, TV advertising is responsible for 71% of total advertising-generated profit at an average profit ROI over three years of £4.20 for every pound spent.

TV is followed by print (which accounts for 18% of total advertising-generated profit), online video (4%), out-of-home (3%), radio (3%), and online display (1%). Online video advertising includes both broadcaster VOD and online video advertising on sites such as YouTube and Facebook.

TV was also found to be the most effective short-term form of advertising, responsible for 62% of all advertising-generated profit in the short term at an ROI of £1.73 for every pound spent, also the highest of any media.

This is followed by print (22%), radio (5%), online video (5%), out-of-home (3%) and online display (2%).

By examining the proportion of campaigns by different forms of advertising that made a profit for the advertiser, Ebiquity and Gain Theory also identified the relative safety of different advertising investments.

In the short term, 70% of TV advertising campaigns delivered a profitable return, followed by radio (62%), print (61%), online video (52%), online display (37%) and out-of-home (19%).

Looking at total profit success during the three years after ad campaigns finished, 86% of TV advertising campaigns delivered a profitable return, followed by print (78%), radio (75%), online video (67%), out-of-home (48%), and online display (40%).

Gain Theory’s Matthew Chappell said the findings should give marketers pause for thought when thinking about where to invest their media spend.

“In a world of big data and advanced analytics, the lure of the easily accessible stat or number can be overwhelming,” Chappell said.

“Too often the easy measures are skewed towards the short term. One of the key aims of this study is to provide something of a correction: to move thinking and measurement from short to long term, to focus on what drives fundamental business success, and to give marketers the tools to do so.”

Matt Hill, research and planning director at Thinkbox, said: “Businesses are under immense economic pressure and marketers have to justify everything they spend. It is crucial that we constantly refresh and update our understanding of what different forms of advertising contribute so that marketers are spending wisely.

“This study by two highly respected, independent organisations with robust data at their disposal bridges the gap between the marketing and finance departments with compelling evidence that quantifies advertising’s ability to deliver shareholder value, and TV’s centrality to that.”

The study was commissioned by Thinkbox from Ebiquity and Gain Theory. In total, it analysed over 2,000 advertising campaigns across 11 categories to uncover the impact that different forms of advertising have on short-term profit (within 3-6 months of a campaign finishing), and then combined these learnings with results for profit generated over the longer term (up to 3 years on) to determine total profit return.