Global TV media costs surge almost a third post-pandemic

Media inflation is driving up the cost of advertising across channels, with TV most affected, according to an analysis by WARC Media. 

TV costs are rising fast

The latest Global Ad Trends* report, The rising cost of incremental reach, finds that, globally, TV CPMs (cost per thousand) have increased 31.2% since 2019 – the steepest incline 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. 

Digital media costs are increasing too 

This twin trend of declining linear television viewership and rising TV media costs is encouraging advertisers to look elsewhere for incremental reach, but price pressure is being felt across the online media landscape. 

Paid social CPMs increased by 33% between 2019 and 2021 (source: Skai) 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

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.

Key quote

“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” – Alex Brownsell, Head of Content, WARC Media.

*Global Ad Trends is a bi-monthly report which draws on WARC’s dataset of advertising and media intelligence to take a holistic view on current industry developments. A complimentary sample report of WARC Global Ad Trends: The rising cost of incremental reach is available here.

Sourced from WARC Media

Disney+ sees benefits in lower ad load

Disney+, the streaming platform owned by The Walt Disney Company, believes that a lower hourly ad load can enhance the viewer experience while helping boost the price of inventory.

The background

• Disney+ boasted 152.1 million subscribers at the end of the last quarter, up by 14.4 million compared with the previous three-month trading period.
• The new ad-supported layer for this platform will be called Disney+ Basic, and launch in the US on December 8th, with plans for an international roll out next year.
• On that same date, the monthly price of Disney+ Premium, its ad-free version will rise from $7.99 to $10.99.

A deliberately conservative strategy

• Bob Chapek, CEO of the Walt Disney Co., said it will be cautious in terms of initial ad load, based on the logic it would be easier to increase, rather than decrease, ad loads.
• “We are walking before we run in terms of seeing what the market will bear in terms of an ad load. So we’re going in very conservative upfront,” he said on an earnings call.
  
• It was reported earlier this year that Disney+ would limit its ad load to four minutes per hour, but Chapek told investors it was in a test-and-learn phase.
• “We believe that there’s probably going to be some more ultimate elasticity in that as well as we go forward,” he said.
  

Lower ad loads, stronger CPMs

• Advertiser demand for Disney+ inventory has been strong, according to Chapek, reflecting the fact this platform houses many “premium brands in content and streaming”.
• Lower ad frequency will provide a “great experience for viewers”, he said. It also helped Disney+ secure an impressive cost-per-thousand (CPMs) at its parent company’s recent upfront.
• “This approach coupled with strong advertiser demand translated into Disney+ earning industry-leading CPM rates at the most recent upfront,” said Chapek.
• When Disney+ started selling ad space, agency executives reported that CPMs were in the $50 to $60 range, which were at the higher end of the industry spectrum.

A different offer than Hulu

• Disney is a majority owner of streaming platform Hulu, but Disney+ will operate on a different tech platform than its sister service.
• Chapek said that Hulu can provide some valuable lessons when it comes to tactics like addressable advertising, but added that Disney+ will have a distinct proposition.
• Christine McCarthy, the Walt Disney Company’s chief financial officer, reported that about two-thirds of Hulu’s 46.2 million subscribers use its ad-supported version.
• “We can’t anticipate that we’d have exactly the same behavior because it’s a different demo that has Disney+ versus Hulu, but that’s the best indication that we have,” she said. “We expect the ad tier to be popular and we also expect some people to want to stay with ad-free.”
  

Sourced from SeekingAlpha, TechCrunch, DigiDay

E-commerce slows in Japan

E-commerce in Japan saw a surge between 2019 and 2021 but growth has since tailed off, partly as the necessity to shop online has receded, partly because the sector is experiencing delivery problems.

Context 

Even before the pandemic, Japanese consumers shopped online much less than those in other nations, and, even with that lockdown surge, they still lag; for example, they shop online for daily essentials about 40% less than the average according to research by Statista.

Why it matters

Now, as consumers tire of shopping on smartphones and sales through brick and mortar stores pick up post-pandemic, there is an opportunity to reignite growth by expanding the role of physical stores in e-commerce. The Financial Times reports examples of clothes retailers seeing increased sales from adding new outlets just to allow consumers to see and try on items they’ve seen online.

Takeaways 

• Depending on the source, from 2019 to 2021 e-commerce grew between 20% (Nowcast & JCB) and 30% (Ministry of Internal Affairs and Communications).
• From January 2020 to April 2022, purchase prices rose in 70% of categories on online platforms Amazon, Rakuten and Yahoo, according to research company Nint. 
• A shortage of delivery workers has prompted some groups to trial the use of self-driving robots to deliver fresh food and boxed meals.

Sourced from Financial Times