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Man looking at laptop and woman looking at mobile phone while sitting in front of a television
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In 2016, for the first time, digital advertising spend surpassed that of television.1

The shift was inevitable – the surprise is that it took this long to happen. After all, TV viewership has declined for years,2  and the internet promises the ability to target consumers on a virtually individual basis.

Still, for TV advertising, the levee has mostly held: buoyed by unmatched audience reach and a long-entrenched and relatively simple ad buying process, television can still deliver an audience like no other medium...for now. At some point, the internet will, without qualification, displace TV. And when that happens, there will be little warning.

A good run

So, what has propped up TV advertising all this time?

First and foremost, the internet isn’t a brand new form of media like radio and TV were when they launched. It uses audio, video and text, just as existing mediums do. Advertisers, then, have viewed the internet as more of a supplement to traditional advertising media, rather than a replacement.

Second, the markets targeted by TV and digital advertising differ considerably. Digital advertising focuses more on consumers making purchase decisions; TV advertising looks to build broad awareness, with advertisers targeting the mass audiences that medium can reach. This is especially true for top-quality TV content like live sports programming, which alone brings in 40% of broadcast TV advertising revenue.3  Top advertisers continue to pay for that reach (55% more of their spend goes to TV over digital4), giving them a still-unsurpassed return on investment.

Pie chart: Top 200 advertisers' share of ad spend is concentrated in television

Source: “200 Leading Advertisers.” Advertising Age, 2017. Reprinted with permission from Crain Communications Inc., copyright 2017.

Third, the internet has not been able to match the caliber of the entertainment content on TV. The rise of high-quality original content from outfits such as YouTube, Hulu and Amazon is beginning to change that, as is the nascent movement of sports content onto the internet.

Finally, the workflow of the advertising industry – advertisers, agencies and media companies – remains, in many ways, locked into the TV advertising model. The entire advertising ecosystem is comfortable with this model; it’s relatively simple and well-defined, and sheer inertia is keeping it that way.

In contrast, advertisers struggle to keep up with the ever-evolving, highly complex digital ad-buying processes. Measurement standards change constantly and doubts about targeting effectiveness remain.

The tipping point

As happened with radio and print, ad revenue likely won’t shift away from TV gradually, but rather with a sharp, sudden turn. The episode will likely mirror the fate of radio, which lost its lead in ad revenues just five years after the commercial introduction of television.5

One possible tipping point could be a macro shock, such as a financial crisis. The 2008-09 recession, for instance, triggered a huge decline in print advertising revenue from which that medium never recovered.

Much like TV viewership, print circulation had been falling for decades, even as ad revenues held relatively stable. It took the crisis to effectively realign the two.

TV ad revenue is also heavily concentrated on live sports programming, especially in football. However, as NFL rights start coming up for renewal in 2021 and beyond, digital platforms such as Amazon and Facebook may acquire additional rights. This could force changes in advertiser behavior.

Another blow to TV advertising may come if internet companies standardize their “viewership” and other measurement methods. If Google or Facebook, which together generate 80% of internet ad revenue growth,6 develop industry-accepted standards and workflow, the inertia that has kept so much of ad revenue focused on TV could break.

200 organisations account for 65% of U.S. cable TV advertising spend and 81% of U.S. broadcast TV advertising spend

Source: “200 Leading Advertisers.” Advertising Age, 2017. Reprinted with permission from Crain Communications Inc., copyright 2017.

Finally, unlike digital, the bulk of TV advertising spend comes from 200 or so companies, primarily in automotive, telecom, consumer packaged goods and retail industries, each of which is under pressure in one way or another.

If just a few of these dominant players shift heavily – or entirely – to digital advertising, the industry could reach the tipping point.

1  Magna Global.
2  “US Digital Ad Spending to Surpass TV This Year.” eMarketer, 2016.
3  “Sports now accounts for 37% of broadcast TV ad spending.” Advertising Age, 2015.
4  “200 Leading Advertisers.” Advertising Age, 2017.
5  Magna Global.
6  Barclays Research.

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About the lead analyst

Kannan Venkateshwar joined Barclays in September 2008 and is currently a Director covering the U.S. Media, Cable & Satellite Communications sectors. Kannan has 13 years of experience across corporate and investment banking.

Prior to joining Barclays, Kannan was with Lehman Brothers working on cross asset strategy research as a generalist covering multiple sectors. Prior to Lehman, Kannan worked at Bank of America and Citigroup in corporate banking, looking at multiple industries.

Kannan earned a B.A. in Economics from University of Madras, India and an M.B.A. from the Darden School, University of Virginia. Kannan also has a post graduate diploma in management from the Indian Institute of Management, Bangalore.

Read the full report

Authorised clients of Barclays Investment Bank can log in to read the full report, Future of U.S. Advertising: Omnipresent and Invisible, as well as the following related reports on Barclays Live:

Future of Media: State of the Global Cable Industry

OTT Video: the best of times, the worst of times…

The Future of Sports

Future of Internet Architecture

For further information about Barclays' research offering, please contact

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