TV ads create 71% of advertising-generated profit

16 Nov 2017  |  Ellen Hammett 
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.

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timlumb, Director, Outsmart on 30 Nov 2017
“Hi Matt – firstly thanks for coming back to me with this detailed response and thanks for the Gain Theory / Ebiquity contacts, so I can explore this a bit more. Much appreciated. Its point 2 where i want a bit more info - i will follow up with them.

1. Ok makes sense.
2. Of the 580 OOH campaigns, what percentage used Route vs spend vs exploited local weight variation combined with disaggregated business KPI data? Also want to unpick what “we exploit local weight variation and combine with disaggregated business KPI data” means.
3. Ok makes sense.”
MattHill, Research & Planning Director, Thinkbox on 28 Nov 2017
“Hi Tim,
We’ve had answers from Ebiquity for you – see below. If you need any more detail drop me an email and I’ll arrange a time for a face to face session with Ebiquity so you can dig into the detail.
Best, Matt

Did the creative execution match the ROI metric? If the creative work used in the OOH campaign is principally aimed at brand perception it can impact a model geared towards short term sales measurement.
We appreciate that some campaign objectives may not be purely about short term sales. Therefore, we have combined the short term sales measurement with longer term multipliers to provide a total view of performance. If any campaign is principally aimed at brand perception then its overarching ambition has to be to drive business performance across a longer term horizon.

Was OOH’s JIC (Route data) used in the OOH measurement?
We capture data that represents exposure of a channel & campaign. This will include Route data/spend etc. The key point is that the variable(s) in the model(s) captures the pressure behind that channel during a particular campaign/time period. We combine formal, big picture Econometrics with more granular approaches. Typically, we exploit local weight variation and combine with disaggregated business KPI data and conduct regional/sub-regional Econometrics or test v. control type analytics. Therefore, we are treating all media channels fairly.

Was the OOH activity large enough to be picked up in the final model i.e. not excluded? There is a clear distinction between a model not seeing a read for OOH, and OOH not working.
‘No reads’ were excluded. It is worth pointing out that Econometrics were used in conjunction with test v. control type analytics to help extract impacts where spend/deployment was too low.

It would be good to know how many OOH models were used in the analysis. And of those, how many meet the above criteria.
There were 580 OOH campaigns in the study.”
MattHill, Research and Planning Director, Thinkbox on 21 Nov 2017
“Hi Tim,
We’ll need to ask Ebiquity / Gain Theory for answers to these questions. So I’ll get back to you once I have them.
Best,
Matt”
TimLumb, Director, Outsmart on 20 Nov 2017
“From an Out of Home perspective, there are challenges with econometric modelling. See: https://mediatel.co.uk/newsline/2016/03/08/econometrics-must-stop-giving-out-of-home-a-rough-ride/

1. Did the creative execution match the ROI metric? If the creative work used in the OOH campaign is principally aimed at brand perception it can impact a model geared towards short term sales measurement.

2. Was OOH’s JIC (Route data) used in the OOH measurement? Thinkbox are occasionally aggrieved by studies that are based on something other than their JIC (BARB). Hopefully they practice what they preach.

3. Was the OOH activity large enough to be picked up in the final model i.e. not Excluded? There is a clear distinction between a model not seeing a read for OOH, and OOH not working.

It would be good to know how many OOH models were used in the analysis. And of those, how many meet the above criteria.”

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16 Nov 2018 

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