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Upfronts Surge Thanks to TV’s Scale

2017 07 26   Peter Feinstein   Advertising    

The upshot of record sales during TV upfronts this year (“TV networks sell a record $19.7 billion in advertising at surprisingly strong upfront market,” Los Angeles Times, July 18) is that digital continues to absorb a share of money way beyond its capacity to deliver value.

Any medium can deliver inventory; it’s what they do. Very few media actually possess real value. TV and radio are two that, regardless of the mild erosion of viewer and listenership, still deliver value every single day – always more than digital. Always. Regardless of whatever ad-tech solution one might want to inlay, overlay or layer on. It’s actually not about media, even though digital continues to try and play this media-rivalry game. Folks in digital advertising either don’t know the business they’re in, or they just don’t understand the numbers very well.

Let me simplify it. First, guess what percentage of people are in the market to buy something being advertised at any given moment. All research I’ve seen – from American Demographics in the 1970s, ’80s and ’90s, as well as more-telling pieces I’ve read in The Wall Street Journal in the last year or two, demonstrates that it’s less than two-tenths of the population.

That doesn’t sound right to you? Think it’s way more than that? Okay, let’s reverse-engineer it. Assume that every industry experiences exactly 100 percent of its annual business over the course of 12 months. Just for simplicity, we can divide that 100 percent by 12. That results in 8.33 percent; so, in any given month, a business will do about 8.33 percent of its total annual sales volume. Now we can reduce that even further – see where I’m going with this – down to the average days in a month, which is 30.41, and you can see that, on average each day, less than three-tenths of 1 percent of people are actually making a purchase.
Since shopping has become nearly a 24-hour-a-day experience, we can again divide this into the number of hours in a day. But instead of getting that small, we can see that the two-tenths of 1 percent is a completely legitimate number to account for all shoppers at any given time.

Maybe you’re scratching your head and wondering why I’m taking you through all this math. It’s simple: When you take a look at the very small numbers of people who actually account for real business at any given moment, you can see that the small erosion in viewer and listenership of TV and radio will have nearly no effect on how well each medium delivers return on investment (ROI) because each is starting with an exceptionally large base of consumers that no digital market ever reaches.

So, while the article I cited at the top is all about the mysterious power of TV’s upfront market, you now understand the reality behind the mystery. And while chief marketing officers and others might not do the same math, they certainly understand the relationship between spending great gobs of money online and not seeing the ROI that they get when they spend the same, or even a little less, in TV and/or radio. TV and radio have a competitive advantage, and likely will for the foreseeable future. They reach more people, and deliver motivated, intention-driven people to take action. Digital media offers no mass scale, and conversion rates that compare favorably with nothing.

There is no mystery here. TV upfronts win. Big. Because the medium still delivers big, regardless of its shortcomings.