It is well known that television viewership habits have been evolving. And now, at least in the US, it appears ad dollars are finally abandoning the traditional television network platform.
According to a Bloomberg article titled: Advertisers Tuning Out TV in Sign of Trouble for Media Companies, 2017 marked the steepest drop in US television-advertising sales outside of a recession in at least 20 years.
As Bloomberg put it:
“The decline in TV viewership is accelerating as online rivals Google and Facebook have increased their investments in video, capturing almost every new advertising dollar entering the marketplace. Television ad sales have fallen even as global advertising grows, leading research firms and analysts to predict that the business may never recover.”
The rise of digital advertising over the last decade has been nothing short of extraordinary. Driven not only by greater audience and engagement levels, digital advertising allows highly targeted and personalised ads to be presented to the right viewer, in the right format, at the right time. This in turn, dramatically increases the ROI of marketing spend for advertisers. And so, through this lens, it really isn’t surprising to see digital advertising dominating as it is.
This dynamic can be clearly observed in the chart below. While North American digital advertising has been structurally increasing, other forms of advertising – especially print – have declined. In terms of television advertising, it has actually been somewhat resilient in North America. Television networks argue that their platform is still critical for brand-building initiatives and is a cost-effective way to build reach quickly. This may be true, but will this be enough?
At least the Chinese experience says no. Now, the Chinese have proven themselves to be far more rapid adopters of new technology than their western counterparts. And shown in the chart below, while digital advertising has gone through the roof in recent years, television has been in structural decline for at least the last five years. And there are no signs of this trend abating.
Andrew Macken is Chief Investment Officer with Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100.