Are National TV Ads Actually Too Cheap?

Interesting question: Are CPMs for national TV ads far cheaper than most assume?

Average CPMs for video advertising:
1)
National TV — ≈ $2
2)
Digital video — $10 to $75

Caveat: CPMs on national TV during specific dayparts are far above this. For example, the average CPM during Sunday Night Football was $75 last year.

Flashback #1: ‘Seinfeld,’ Shrinkage And The Rising Cost Of TV Viewers


Quick math:
1)
Total video ad impressions per year — 19T
2) # of video ad CPMs — 19B
3)
National TV ad spend in 2017 — ≈ $43B
4)
Average National TV CPM $ — $2.26

Just add data: Improved targeting (addressable, optimized linear, etc.) will bring higher CPMs (4X+) which will allow for a lower ad load while growing total revenue. This is a rare win for both the advertiser and network.

National TV ad spend share by targeting type:
1) Age/Gender — 95%
2)
Advanced TV/Audience — ≈ 3% 
3)
Addressable — 2%

Quick math:
1)
Total TV ad market — $70.2B
2)
% targeted to age/gender — 95%
3)
Total $ targeted to age/gender — $66.7B
4)
Digital video spend — $12.6B

Big opportunity: For every $1 in digital video ad spend, there is $5 of traditional TV spend that is still targeted to age/gender.

Scale: There are more minutes of video advertising delivered daily from TV during Judge Judy than all of YouTube across all of America every day.

U.S. video ad spend by year according to Forrester:
1)
2018 — $91B
2)
2023 — $103B

Digital share of U.S. video ad spend by year:
1)
2018–21%
2)
2023–34%

Quote from Jim Nail — Principal Analyst @ Forrester:
“Part of this is adding OTT and other distribution channels of long-form episodic video entertainment. But online video deserves a place on the schedule, too. This introduces the discipline of omnichannel video advertising: how do you determine the right allocation among the different video forms? How do you maintain a consistent message while adapting executions to the characteristics of each channel? What language do you use to talk about it: impressions? GRPs? Reach? Frequency? Something new?

For digital advertisers, the report shows that while the “banner,” i.e, static, ad forms will persist, online advertising has been rapidly shifting toward video, and that will continue. So digital specialists must learn a new advertising skill — storytelling — that is the essence of video and not necessary in static ad forms.”

Flashback #2: Flight to quality takes hold in end-of-year video ad spending, pushing up prices

TV still accounts for 85% of video ad spend.


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