TV Advertising's Three Pillars Of Stability

For those who work in TV advertising, it seems that the industry is perpetually lurching from impending doom to Golden Age, with commentators apparently undecided on which angle to run with. Ultimately, when delivering a reliable prognosis on the industry’s well-being, three factors are key: current TV viewing habits, business confidence in the economy and, on the other side of the coin, consumer spending.

Of course, new technologies, special sporting or social events, and even the weather can influence the health of the TV advertising industry, but they do not make or break the market. If one of the three key threads frays, however, then ruptures in the fabric could eventually lead to disintegration. So, are we to enjoy a year of snug warmth, or will we end up desperately thumbing for the sowing needle?

TV Viewing Upholds Its End Of The Deal

According to Thinkbox's Annual TV Viewing Report, during 2014 the average UK adult watched 2 hours 25 minutes of television as viewing figures plateaued year-on-year. Another key figure highlights our lasting relationship with commercial TV: commercial impacts – or, to avoid jargon, the amount of views – have increased by 27% compared to a decade ago, with the average TV viewer clocking 45 TV advertisements a day and 65.8% of all TV viewed on commercial channels. Coupled with these heartening viewing statists is the 40% reduction in TV advertising costs compared to twenty-years ago, with wider channel choice, greater competition amongst broadcasters and advanced analysis tools lowering rates whilst boosting cost-efficiency.

TV's strong performance in terms of viewing figures was one catalyst for another year of market growth, with 2014 generating £4.91 billion in TV advertising revenue – a year-on-year increase of 6%. This is the fifth consecutive year of uplift, signifying TV’s enduring popularity among businesses. Online brands in particular were pivotal to the continuation of this upward curve, injecting £400 million into the market to double the sector's spend from a decade ago. And, as the synergy between TV and online as a sales portal becomes more streamlined and efficient, early forecasts for 2015 point to yet another twelve months of growth, with a 5.5% hike in revenue anticipated.

Brands Growing In Confidence

With box one safely ticked off, our attention turns to why business confidence is growing amid the current economic landscape. A recent report from BDO, an accountancy network, found that, for the first time in six years, business inflation rates have dropped to what could actually be construed as deflation – meaning that, instead of bobbling on the surface in the hope that the seas will calm, businesses now have the means to power up the engines and go full steam ahead. This new room for investment has in turn instilled a rosier economic outlook on 2015, with confidence amongst small businesses in particular described as ‘robust’.

This new optimism has been growing gradually – a fact reflected by further Thinkbox research. 2014 saw 800 new or returning (following a five-year hiatus) TV advertisers entering the market, up from the 700 brands added to the industry in 2013. Last year Guerillascope alone launched over 50 newcomers to become the second largest agency in the UK by number of active clients, behind Mediacom only.

However, although 800 new or returning advertisers is an extremely encouraging statistic, the combined revenue of this group still only accounted for approximately 2% of the overall market last year – indicating that the majority of brands advertising on TV are there for the duration. This is pleasing, in that it demonstrates how more businesses are not only turning to TV advertising in the first place, but are leaving behind the damaging focus on short-termism by committing to long-term, sustainable investment.

To substantiate this point: of the brands that advertised with Guerillascope last year, 35% had also run TV campaigns in 2013, with 44% having been active with Guerillascope in the five-years preceding 2014. We expect a majority of those who launched debut campaigns last year to return and exploit the unprecedented affordability of TV advertising in 2015; harnessing opportunities now abundant for businesses regardless of size.

A New Surge In Consumer Spending

So far, two boxes, two ticks, but what about the third? Well, according to new research from Mintel, consumer spending is on the up, with 25% of adults surveyed stating they’re a lot better off than this time last year and 45% claiming to now get by comfortably.

The report found that consumer confidence increased in January, with the millennial generation carrying a brighter outlook as wage increases exceed inflation for the first time in several years. The overarching point here is that the New Year has ushered in a new willingness amongst consumers to spend money. This is felt most keenly among higher earners, suggesting brands selling products and services at the higher end of the market will benefit most from this boon – with the travel and homeware/DIY sectors traditionally busy at this time of the year.

It is, however, vital to exercise caution when attempting to gauge consumer sentiment. Whilst confidence is edging upward, circumspection still lingers in the air. Business should remain aware of this, and configure their marketing messages accordingly to incentivise engagement, either through deals, competitions or compelling brand stories. Augmenting this point is new research from voucherbox.co.uk, which has found that, so far in 2015, 57% of people surveyed claimed to use voucher codes online at least occasionally, with 17% stating they now ‘always’ utilise discount codes. This, says analysts, is proving influential in increasing revenue streams for brands, and is indicative of a new shrewdness embedded in buying habits.

Conclusions

With a checklist full of ticks, the evidence points to a TV advertising market currently in rude health. Too often, forecasts are hastily made based on short-term observations, whilst improved revenue figures in other mediums are interpreted as TV’s death knell. Such predictions are made on a weekly basis – yet here we are, revelling in a fifth consecutive year of revenue growth, an ever-improving economical outlook and increased consumer spending. TV advertising’s three core pillars may be built on changing terrain, but rooted so deeply within the landscape, the structure they support continues to stand tall year after year.