How long do the profits from advertising take to materialise?

Advertising has an average short-term profit ROI of £1.87 per pound invested which increases to £4.11 when sustained effects are included; a major new study concludes that 58% of advertising’s total profit generation happens after the first 13 weeks.

Context 

Profit Ability 2: the new business case for advertising*, commissioned by TV industry body Thinkbox, is an update and expansion on a similar 2017 study, which found that TV ads drove 71% of advertising-generated profit.

The latest report analyses the profit generated by advertising at different stages as its effects build over time: immediate (within one week); short-term payback (up to 13 weeks); sustained payback (week 14 through to 24 months); and full payback (0-24 months).

Channel breakdown

• TV accounts for 54.7% of advertising’s full payback but only accounts for 43.6% of total advertising investment. Within this, Linear TV accounts for 46.6% of full payback and BVOD accounts for 8.2%.
• Online Video (which is mostly YouTube) has an average full profit ROI of £3.86 for every pound spent and accounts for 3.4% of full advertising-generated profit.
• Generic PPC (unbranded online search) offers the highest immediate payback, but its effects rapidly diminish after the first week and it has a weak sustained payback.
• Linear TV is the second strongest performer for immediate payback, followed by Paid Social, Audio and BVOD.
• TV also has the highest saturation point: advertisers can increase investment here to a higher level than other media and it will continue to generate a profitable return.

ROI varies by sector  

• Full profit ROI varies by sector: in the automotive sector, for example, it’s £4.65 per pound invested, more than double the figure for the financial services sector (£1.95).
• That’s down to nuances in the different business environments, including the value of products, operating margins and the relative strength of advertising on sales.

Why advertising payback matters 

“This is about the strength of advertising as a business investment that grows the bottom line and grows the economy,” said Matt Hill, research and planning director at Thinkbox. 

* The study was produced by Ebiquity, EssenceMediacom, Gain Theory, Mindshare, and Wavemaker UK, using their huge econometric databases of client data. The final report covers £1.8bn of media investment in the UK across 10 media, 141 brands, and 14 categories.

Sourced from Thinkbox