Television advertising 'creates most profit'

New research has revealed that TV advertising delivers the best return on investment of any advertising medium, but companies are failing to capitalise on the growth of connected TV.

The Payback 3 report, conducted by Ebiquity and commissioned by TV marketing body Thinkbox, found that TV advertising creates an average return of £1.70 for every £1 invested. This compares with £1.48 for radio advertising, £1.40 for press, £1.06 for online static display, and 45p for outdoor marketing.

It found that return on investment (ROI) from TV advertising has also increased by 22% over the last five years, despite the global economic downturn.

Ebiquity studied 3,000 ad campaigns across nine advertising sectors - including TV, radio, press, online static display and outdoor - between 2006 and 2011, and compared the sales and profit derived on a like-for-like basis.

The study found that TV advertising is 2.5 times more effective at creating sales uplift per equivalent exposure than the next best performing medium, which was press at 37%. Radio was next with 19%, followed by online static display at 15% and outdoor at 9%.

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TV advertising also has a "halo effect" across a brand's portfolio, meaning 38% of TV's sales effect is seen in products not directly advertised on screen. TV was found to be responsible for 71% of attributable sales in Ebiquity's research, but only accounted for 55% of the overall spend.

Andrew Challier, the effectiveness practice leader at Ebiquity, said that TV is "weathering a perfect storm of economic downturn" and continuing to provide competition for the emerging media such as online.

"[TV's] unrivalled effect on sales and profit and its profound influence on other media make TV advertising both the most effective form of advertising and a powerful ally to other media and marketing mechanics, both on and offline," he said.

Thinkbox research and planning director Neil Mortensen added: "Advertisers instinctively know that TV advertising works but we must make sure we continue to prove it.

"Ebiquity's study does exactly that. Our task now is to share this important information with businesses and show them that no other form of advertising creates more profit than TV."

However, a separate study by the Internet Advertising Bureau (IAB) has found that advertisers are not making the most of the emerging opportunities held in connected TV and IPTV.

The IAB discovered that 88% of marketers don't have an IPTV strategy at all, despite Informa predicting that Samsung, LG and Sony will sell 52m internet-connected sets this year.

Sales of internet-enabled devices, particularly connected TVs, are expected to outsell PCs by 2013, potentially providing a huge platform for advertisers to reach their target audience.

Connected TV is also considered a powerful conduit for advertising as it brings together the 'lean back' experience of TV viewing with the 'lean forward' approach of the internet, providing opportunities for greater interactivity and targeting.

But advertising on connected TV and around video on-demand is still largely regarded as unproven by companies compared with 'spot' advertising in big shows such as The X Factor.

Jack Wallington, the head of Industry Programmes from the IAB, said that the research has revealed a "staggering amount of uncertainty when it comes to internet-connected TVs".

He added: "It's clear the industry considers the platform a significant leap for online advertising, but it has also become apparent that like so many other technological developments we're waiting for the customer to leap first."

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Simon Woodward, the chief executive of digital TV specialist ANT, agreed that connected TV advertising remains a "chicken and egg situation".

"Marketers are waiting for consumers to demonstrate interaction with brands on TV sets, but without the content, consumers have nothing to interact with," he said.

"However, consumers are slowly interacting. Take popular TV shows like The X Factor where viewers can vote from their sofas via the red button, interacting with content on the TV like never before.

"Marketers have an opportunity to capitalise on this new medium as an innovative way to connect with their audiences. It's all about social interaction now and as the home becomes more connected, consumers are looking for a complete multiscreen viewing experience. Marketers can't afford to miss a device out of the loop."

Chris Gorell Barnes, the chief executive of Adjust Your Set, added: "The rapid uptake of connected TVs should warrant serious consideration from brands on the potential opportunities available and future revenue streams.

"While people are purchasing internet-enabled devices it is still unclear whether they will plug them in. It is the industries' responsibility to create compelling content propositions to persuade the audience."

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