Media inflation is driving up the cost of advertising across channels, with TV most affected, according to WARC’s latest analysis, global advertising trends: the rising cost of incremental reach.
Globally, TV CPMs (cost per thousand) have increased 31.2% since 2019 – the steepest rise in more than two decades – and are up 9.9% year-on-year in 2022.
The trend is especially pronounced in the US, where TV CPMs are forecast to reach $73.14 in 2022, an increase of 40.0% on pre-COVID costs.
For some categories the impact is heightened. According to WARC Media data, advertisers in the food category spent on average 79.8% of their budgets on TV in 2019, and in the automotive category, 67.7%.
If they were to have maintained that same level of investment, by 2021 the volume of impressions would have decreased by 18 percentage points.
Global, TV media cost. Source: WARC
Digital media costs are rising as well
This twin trend of declining linear television viewership and rising TV media costs is encouraging advertisers to look elsewhere for incremental reach i.e. unique audiences delivered by additional channels (often online) on top of the audience reached by a brand’s primary mass media activity (often TV).
However, price pressure is being felt across the online media landscape. Paid social CPMs increased by 33% between 2019 and 2021 and the growing popularity of retail media formats is pushing up the cost of advertising on platforms like Amazon.
Channels such as broadcaster video-on-demand (BVOD) provide an alternative source of incremental reach.
However, over-the-top (OTT or streamed video) ad costs are rising too: inflation in advanced TV formats in the US is forecast to reach 9.9% in 2022, as per World Federation of Advertisers (WFA) figures.
Relative bargains can still be found in channels like radio and OOH
The pursuit of incremental reach has generally focused on digital audio-visual channels, as they offer a more straightforward transition from television.
In comparison, offline channels are often under-utilised, despite not having witnessed the same levels of price inflation since 2019.
In Australia, the cost of radio media in 2022 remains 1.1% below pre-pandemic levels, while prices in the US are largely unchanged three years on.
A similar picture emerges in out-of-home (OOH), incorporating both static and digital panels: in the UK, outdoor ad prices are 3.1% lower than before COVID-19, while, in the US, OOH remains 5.8% cheaper than it was in 2019.
What does this mean for brands?
Advertising at scale will become less efficient as costs rise TV remains the channel of choice for large-scale advertisers seeking growth.
Alex Brownsell, head of content, WARC Media, and author of the report, said: “As linear TV’s share of total media consumption declines, particularly among younger audiences, brands are looking elsewhere for incremental reach.
“However, the efficiency of delivering reach via non-TV channels is being threatened by inflation across the media ecosystem.
“As the global economy teeters on the brink of an inflationary recession, media costs may experience further volatility.
“Nonetheless, non-video channels are worth consideration if they are right for the audience.”
Mike Campbell, head of international effectiveness, Ebiquity, says that the dilemma facing marketers is how to maintain the high-reach media plans of yesteryear and maintain ROI levels.
“The problem is that the alternatives to TV have a number of things working against them. In short, if channels are skippable or swipeable, then people skip or swipe; therefore, alternatives to TV do not typically generate the same attention as TV”, said Campbell.
“Of course, formats can be purchased that are not skippable, but it naturally comes at a cost.
“For advertising to be effective, the media channel that is used has to have a good balance of low cost, good reach, and consumer attention. This is the holy trinity of effectiveness with respect to channel planning.
“The impact of having poor attention is that the ROI drops significantly.
"Whilst, understandably, advertisers will want to divest out of a channel with high inflation, they should tread very carefully before doing so.”
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