The Big Game is advertising’s biggest night – a combination Raspberry Festival and Oscarcast. So it seems almost ungrateful to ask if in fact it’s become a kind of parade of faded beauty, like a Miss New Jersey pageant for the undead. But tough times call for tough questions, and so we ask:
Is advertising dying, like magazines and taxis and bowling and winter?
Ads and television go together. Creaky old TV is still the largest ad medium by far. Companies spent $67 billion trying to get our attention on TV last year, according to ZenithOptimedia.
And you’re still watching that box. Last year’s suspenseful Super Bowl XLIX was not only the most-watched Super Bowl ever but the most-watched TV show ever. It had 114 million viewers, or about one-third of the entire U.S. population. (Another 4 million tuned in to watch Katy Perry and then, presumably, went back to church.) Of the eight most-watched TV programs in U.S. history, seven were Super Bowls.
And now that they have our attention, the networks and the NFL do the American thing: they sell it. The cost of an ad spot on the big game keeps going up, to about $5 million for 30 seconds this year. Between 2005 and 2014 the price flew up 75%. To bring this home, the big boys like Taco Bell and SunTrust and Colgate are each paying about $3 to reach you (yes, you). Some people might prefer the $3.
So it would seem television, advertising and football are a trifecta of economic health.
And in fact, this is not so.
And it is.
RIDING THE CYCLONE
We are in a time of outrageous disruption. We’re all riders in an existential Coney Island Cyclone too focused on staying alive to see the danger we’re in. Things that would have seemed like magic to our only slightly younger selves — reading email in the train, ads for items we just saw on another site — are already dated. Industries disappear in an instant, fortunes are made and lost.
So what about advertising?
It ebbs and flows with economic fortune. It’s an operating expense and so gets braked in hard times, rides the rails in good. Right now, it’s flourishing. 2015 spend by U.S. advertisers was $183 billion, according to AdAge. This is back over the prerecession level of 2007. Digital advertising is skyrocketing, up 20% annually year after year, largely at the expense of offline media. And in fact, digital could finally overtake TV in 2017 — a milestone blunted by TV’s own transformation into a fancy internet video player.
Ad agency jobs have climbed back to their level before the summertime sadness of 2001. Global ad spend last year was $545 billion. Average growth rates for 2016 projected by GroupM, Magna Global and ZenithOptimedia are 4.8% for the U.S. and 5.6% globally.
- Ad blocking in browsers grew 41% last year
- 56% of DVR users skip commercials
- Trust in advertising could hardly be lower
And the Super Bowl is something of an anomaly. Mass audiences are as rare as Taylor Swift haters and attached mainly to a few big events. In fact, if you subtract football from NBC, CBS and Fox, viewership among 18-49 year old men plummets 45%. So the rise in price for Super Bowl spots in fact masks a deeper problem: it’s one of the only ways left to get the attention of a lot of people (particularly attention-challenged men, what?) fast.
The main truth about modern media is that it is fatally fragmented. Anyone can start a website and most of us do. This has challenged publishers and broadcasters like you wouldn’t believe and given rise to ad tech. The fragmentation itself is dramatic. In 1992, the average TV household got around 28 channels; two decades later, almost 200. In 1995, there were 300 programs with a 10+ rating; 20 years later, only a dozen. Most shows get a rating of 1 or less.
And forget about the internet.
Advertisers, publishers and some very smart scientists responded by building an academically fascinating infrastructure — this is ad tech — that tries to solve the fragmentation problem by providing a way to target individuals themselves, rather than publications. As you’ve noticed, you can now be located almost anywhere … which leads to a saturation of banner ads on marginal sites … which leads to frustration, annoyance, ad blocking … and, finally, forecasts of the imminent demise of advertising and the rise of something called “customer experience,” which seems to be defined as everything that isn’t advertising.
So we can’t forecast the future, any more than we could have forecast the present in 1992. But that won’t stop us. What can we say about advertising? Three things:
- It will not go away: For good economic reasons, there will always be brands willing to pay to get our attention. There is money to be made in raising awareness for new products, product launches, line extensions, and the unending battle for share. Word of mouth doesn’t scale fast enough for next quarter’s earnings call. If one channel doesn’t work, that money will find another: it will move back to search or Facebook ads or addressable TV. (For example, event sponsorship — a visible form of paid placement often associated with broadcast TV events — is growing.)
- It will change dramatically: Advertising formats come and go. In the 1940’s, brands incorporated their message into the fabric of radio programs, and the rise of so-called “native” formats — where ads are woven into the flow of your mobile newsfeed like a ripple in a pond — is a remarkably similar approach. We’ve already lost pop-up and pop-under ads. Traditional banner formats are fading, particularly on mobile. The personalization of ad content is only just beginning. In future, it’s safe to say ads will be less obtrusive and more personally interesting. There will also be fewer of them, which will make each one more expensive.
- Its salvation will be measurement: Advertising is not as unaccountable as some think, but it is difficult to measure. (I know: I used to try to do it for a living.) TV is particularly confounding, and measuring the return on those $5 million Super Bowl spots will require a lot of post-hoc stitching together of econometric models and Monday morning scrutiny of web traffic and social sentiment. The real impact for long-cycle products like cars and home loans may never be known with precision. But methods continue to improve. It is now possible to track individual ad exposures in digital channels directly to sales in ways that were impossible five years ago. If real value can be shown to a CMO, money will follow. (For a lucid discussion of a future measurement scenario, check out my colleague Charles Golvin’s Super Bowl-rific blog post here.)
In fact, one entirely plausible future is one that looks very much like the past. Instead of the Big Three networks of ABC, CBS and NBC, there will be the Big Three networks of Facebook, Google and … someone else. Instead of mass buys on major programs, there will be mass buys of highly targeted audiences on major distribution networks. Power goes from content to distributors and we’re back where we started. Chaos ebbs until something else, something we’d never guess, happens to change it all again.
Oh, and one more thing we can predict with certainty: There will always be a Super Bowl. #playon