Global TV media costs surge almost a third post-pandemic
Media & communications budgetsAdvertising expenditure & forecasts
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.
“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 reachis available here.
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Omnichannel retailPharmacies & drugstoresUnited States
Warby Parker, the eyewear company, will “normalise” its marketing spend to pre-pandemic levels, a shift driven in large part by consumers returning to its brick-and-mortar stores.
Why it matters
The COVID-19 pandemic led many brands to adjust their marketing budgets as physical stores closed and shoppers made a greater amount of purchases online. As consumers return to many of their old habits, however, brands will need to reassess spending patterns accordingly.
While Warby Parker initially rose to prominence as an online direct-to-consumer brand, by the end of its last trading quarter, the brand had over 175 physical stores.
Steve Miller, its chief financial officer, said on an earnings call that its marketing budgets were shaped in part by the varying economics of online versus offline retail.
“In general, we tend to see that our e-commerce business is more highly correlated with marketing spend and performance marketing dollars,” he said.
By contrast, “our stores serve as billboards and don't need as much marketing support,” Miller added.
As consumers switched online during the pandemic in 2020 and 2021, the brand “elevated our marketing spend as a percentage of revenue” accordingly.
However, as the sales mix now more closely resembles that from 2019, before the onset of COVID-19, Warby Parker is refining its marketing strategy.
“We are normalizing back to a level that we observed pre-pandemic that we think matches the business mix,” said Miller.
As a percentage of revenue, that means a drop from 15.6% in the second quarter of 2021 to 13.8% in the same period in 2022. Long term, the aim is to reach the “12% level that we were at pre-pandemic,” Miller said.