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Advertiser spend on TV and social media is twice as high as daily consumption

For the first time, social now attracts more investment from advertisers than linear TV, a new WARC Global Advertising Trends report reveals, but both media attract a disproportionate share of advertising budgets when one considers the time the average consumer spends with these channels each day.

WARC Global Advertising Trends: The Investment Gap

• Social media is forecast to account for 39.1% of 2022 adspend but has a 21.4% share of daily media consumption; the equivalent figures for linear TV are 31.5% and 16.1%.
• Social media spend would need to reduce by $94.3bn in order to mirror global consumption levels next year, while the investment gap is $86.9bn for linear TV.
• The largest gaps between social consumption and adspend can be found in China (where advertiser spend is 3.3x consumption), the UK (2.2x) and the US (2.0x).
• Conversely, in Australia (0.9x), India (0.4x) and Russia (0.5x), social’s share of daily media consumption is higher than its share of advertising budgets – a potential indicator of opportunity for brands.
• While linear TV spend is inflated in relation to its consumption, online video is now close to parity after years of underinvestment.

Undervalued media

• Podcasts are found to be undervalued by $40bn, with the greatest opportunities for advertisers among audiences aged 16–24, middle earners, and those educated until the age of 16.
• Advertisers would need to spend $58.0bn on online press ads globally next year to achieve parity with consumption levels. Instead, forecast spend is just $12.8bn.

WARC’s Global Ad Trends: The Investment Gap is based on WARC analysis of advertising spend forecasts for 100 markets worldwide, combined with the results of a survey by GWI of more than 715,000 consumers. A sample report is available for all. WARC Data subscribers can read the report in full.

Reaching Southeast Asia’s new digital audience

Digital penetration during the pandemic has increased by 15% or more across Southeast Asian markets, thus adding a whole new audience to an already fragmented landscape.

Why it matters

While the detail varies in each market, ad budgets are increasingly allocated to digital channels such as search, social and video, and, says Nielsen, influencers are a fast-growing touchpoint. 

Key stats

• Philippines: internet usage stands at 87% (Q2 2021) up from 70% (Q2 2019), smart TV usage at 17%, up from 7%, video on demand viewing at 27%, up from 6%. 
• Thailand: internet penetration increased 15% during the pandemic, with increased uptake among the rural population and older consumers. 
• Instagram claims two thirds of the total number of influencers within the region; within that figure, Indonesia has the highest number of influencers with over 7 million personality profiles. 

Key quote

“Where influencers are really fitting in is how they are able to deliver and reach the specific audiences they are engaged with. Brand recall for influencer content is 4x up versus traditional digital content” – Nicholas Bruce, Head of Consulting and Research for Asia at Nielsen.

Sourced from Nielsen

TV and social advertising inflated compared to consumption

Advertising spend on TV and social media is highly inflated in relation to daily consumption worldwide, according to WARC Data's latest Global Ad Trends report. The analysis compares WARC Data's new quarterly advertising spend figures with GWI's survey of more than 700,000 consumers.

Why it matters

The purpose of the report is to assist clients in identifying the discrepancies between daily media consumption and advertiser spend, in order to better recognise opportunities for optimisation.

It also finds global social media advertising spend is now larger than linear TV investment while podcasts are being potentially undervalued by as much as $40bn.

Takeaways

• Spend on TV and social media is highly inflated in relation to daily consumption.
• Conversely, audio formats and online press appear to be heavily undervalued by advertisers.

A sample of the report is available here and WARC Data subscribers can read it in full here.

Sourced from WARC Data, GWI

Mindful self-disruption: how to work like China’s tech giants

Titans like Alibaba and ByteDance experiment constantly with their core products, a new analysis argues, with innovation at the centre of strategy rather than a set of initiatives at the fringes of a company – then, having created something new, the trick is to stimulate both demand and supply.  

Analysis

“The most interesting thing about Chinese tech startups isn’t necessarily how innovative they are, but how willing they are to shake up their best, most core assets and disrupt themselves,” writes analyst Rui Ma in a piece for the venture capital firm Andreessen Horowitz’s in-house magazine, Future.

Specifically, Ma explores the strengths of companies that lead in the areas that China has pioneered, notably live e-commerce and short video.

Alibaba

Live e-commerce wasn’t an overnight success. Alibaba spotted that growth was increasingly coming from commerce linked with content.  So it pushed aggressively into the space, training potential streamers and setting up events like Singles Day to drum up interest, incentivising sellers and dedicating media dollars and prime app position.

TikTok

Known as Douyin in China, TikTok wasn’t ByteDance’s original bread and butter. First came the news aggregator Toutiao, which bet big on video and even bigger on data prices falling. Like Alibaba, its new idea required focus and money, bringing on board big names both to grow demand and spur supply.

Competition is a key

Partly, the reason for Chinese tech’s speed is competition: “The domestic market is incredibly competitive and international markets have thus far been pretty inaccessible. Chinese companies fight over every market opportunity,” writes Ma.

But they also tend to develop differently from large western companies. Rather than slowing down with size, they speed up and make more changes.

Sourced from Future

Not investing enough in news brands could have negative results

Increasing investment in news brands versus other channels delivers the greatest gains to the bottom line, according to research from Newsworks.

Why it matters

News brands work effectively alongside other media, but can work harder. That is demonstrated in Newsworks’ figures showing that increasing investment from low levels boosted campaign PROI by 60% for print news brands and 62% for digital news brands. The latter figure is in stark contrast to general online display – what Newsworks’ Denise Turner calls “the run of the internet” – where boosting investment actually reduces PROI by 23%.

Takeaways 

• Over the last three years, brands have enjoyed a 10% profit boost by investing in news brands: £268m between 2017-2020 has the potential to become £1bn by 2025.
• In terms of broad categories that can benefit, the research highlights Leisure & Pleasure (including supermarkets), Shiny New Things (non-grocery retail) and Grown-up Stuff (finance and motors). 

Key quote

“There’s a certain proportion of investments that should go into news brands to deliver optimum profit to the bottom line. It’s not profit that comes back from news brands, it’s profit to the whole bottom line from advertising investment” – Denise Turner, Director of Research and Insight, Newsworks, speaking at the Festival of Marketing. 

Newsworks’ research is based on a decade (2011-2020) of effectiveness data and a meta analysis of 1012 econometric models. The trade organisation has also devised a profit calculator to enable advertisers to see how to optimise spend in news brands across specific categories and increase their campaign profit return.

Sourced from Newsworks

PayPal moves for Pinterest, hinting at ‘super app’ ambition

Payments firm PayPal has made an offer of $45 billion for the inspiration-focused social media and shopping site Pinterest – one of the largest consumer tech deals ever, should it go through – with its eyes on a combination of social media, financial services, and commerce.

Why it matters

Two reasons: It’s literally a big deal. The closest in consumer tech was Salesforce’s acquisition of Slack for $27.7 billion in 2020.

The second, and more important, is what the potential acquisition, first reported by Bloomberg, says about the capabilities that PayPal is looking for. Following acquisitions of the deal-finding service Honey in 2019, and Japanese buy-now-pay-later platform Paidy last month, the company has amassed an arsenal of financial services.

But Pinterest is of a different magnitude, planting a flag in a new category and among a serious user base of 459 million MAUs, an influential marketing touchpoint, and a blossoming commerce business.

Super app

Western tech firms have long coveted the suites of services offered by ‘super apps’ like Tencent’s WeChat in China. Back in July, PayPal CEO Dan Schulman sketched the plan to the FT as combining messaging, savings, payments and money transfer, shopping and even crypto.

The tough part, however, is not in giving people services but in getting people to engage with and use the app regularly – PayPal will be hoping a sticky service like Pinterest will provide just that. This would be no simple audience purchase; moving people across from users of a mood board, even if they buy from it, and into a financial platform is a major task.

Sourced from Bloomberg, Financial Times, TechCrunch, PayPal [Image: Pinterest]

Marketing budget growth at strongest in over four years

Total UK marketing budgets have increased at the strongest rate since Q2 2017, according to the Q3 IPA Bellwether Report, as an effective vaccine program and the loosening of pandemic-related restrictions enable pent-up consumer demand to find expression.

Key findings 

• A net balance of +12.8% of firms registered upward budget revisions in Q3 2021, from +6.0% in Q2 (the first time in three years that successive quarters of growth in overall marketing spend has been registered).
• Main media advertising was the best-performing marketing category in the third quarter, with a net balance of +8.6% of firms recording upward budget revisions (from +1.3%), as more firms upped their spending on 'big-ticket' campaigns.
• Within main media, video (+12.6%, from +4.2%) was the main driver, followed by other online (+10.6%, from +11.0%) and audio (+6.0%, from +1.1%).
• Adspend is predicted to grow 6.6% in 2021 and 6.2% in 2022 before normalising from 2023 onwards. 

A note of caution 

While upward revisions to total marketing budgets were strong, they fell short of the growth firms initially had predicted for the 2021/22 financial year, when a net balance of +17.4% of firms anticipated expansion. There remain concerns around the trajectory of virus cases as we head into the winter period, while ongoing supply chain disruptions are also affecting the ability of some firms to carry out marketing campaigns.

Key quote

“We hope this is just the beginning, and businesses continue with their aggressive growth plans to keep momentum moving as the post-lockdown growth boom peters out” – Joe Hayes, senior economist at IHS Markit and author of the Bellwether Report.

Sourced from IPA

CMO and CIO collaboration key to business growth: report

The chief marketing officer and the chief information officer are two roles that ought to collaborate more. focusing on hybrid customer experience to grow their business, says a new Forrester report.

Why it matters

The pandemic has changed the CMO/CIO partnership, notes The CMO and CIO Partnership in Digital Transformation report. It is forcing marketing and IT to work more closely to achieve customer success while producing new opportunities for CMOs and CIOs to align their teams to accelerate digital transformation, especially around hybrid commerce. 

Key insights

• A strong partnership between marketing and technology is necessary, and while examples of great collaboration have been scarce, the pandemic closed the gap, with a third of B2C marketers saying in 2021 that CMOs and CIOs are strategic partners.
• The percentage who consider that marketing requests are a low priority for IT dropped from 23% in 2020 to 12% in 2021.
• Despite strong e-commerce growth, CMOs and CIOs need to focus on hybrid commerce to ignite their collaboration.
• CMO and CIO have to rethink the martech ecosystem to stay ahead of data deprecation – a good opportunity to collaborate.
• CMOs, CIOs may have different goals (eg brand perception vs platform security) but it is critical to co-own business KPIs.

Quote

“For years, IT was the one thing that kept me awake at night but now that we have elevated the CIO role at the executive committee level in all our markets, we have started working closely together and I have committed to help my peers by reducing our complex product and tariff portfolio” – Nikos Vlachopoulos, Global CMO, Vodafone.

Sourced from Forrester

Netflix ramps up subscriber growth, adding 4.4m in Q3 2021

Netflix's slowdown in growth in the first half of 2021 looks set to be reversed in the second half of the year, according to the latest company reports.

Why it matters

Additional data show that audiences use an average of five video streaming services, putting pressure on Netflix to continue its market leadership. As video streaming becomes more competitive, focusing on new audience groups will become more important. For Netflix, this includes older audiences, a segment that it currently lags behind in.

Takeaways

• Netflix added 4.4m paid streaming subscriptions in Q3 2021, more than twice as many as it added in the second quarter.
• The company also expects to add a further 8.5m subscribers in the final three months of the year, taking the total to a forecast 222.1m.

WARC Data Premium clients can access the latest data on Netflix's performance here. If you do not currently have access, register your interest to find out more.

Sourced from Netflix, WARC Data

Streaming is about time spent: Netflix and YouTube are dominating

Despite strong subscriber competition from established firms like Disney, new research suggests that Netflix and YouTube continue to dominate people’s attention with a 47% share of time spent watching, according to technology, media and telecommunications research firm Lightshed.

Why it matters

What’s interesting about LightShed’s new research is how Netflix and YouTube’s time spent is exceptionally strong even as new competitors from established TV giants, like Disney and subsidiary Hulu, have grown subscribers by around 50%. “The clear implication is that time spent per household subscriber fell meaningfully for both services,” says LightShed.

Of course, it’s not a totally fair comparison as YouTube is free to air, though it does reinforce its status as a good destination for ad dollars.

But the research firm suggests that both Alphabet’s streamer and Netflix have cracked the important aspects of streaming which is capturing more time spent through a wide breadth of content. Engagement is fundamental to a robust subscription service over the medium- to long-term. For Disney, high subscriptions with low engagement could spell very real problems when it must inevitably raise prices.

The research

• Based on a combination of Comscore figures and LightShed research estimates, the new study compares share of viewing hours between January of 2020 and June 2021. 
• It applies an extraordinarily wide definition to connected TV as the amount of subscriber time spent on a service via smart TV, streaming device, mobile, tablet, or PC.
• Netflix and YouTube continue to dominate with 26% share for Netflix with a subscriber increase of just 9%, and YouTube taking 21% of people’s viewing time.
• The core comparison is to Disney+ which despite 55% subscription growth in those 18 months has seen share of time decline from 5% to 4%.
• Hulu, which also saw strong subscriber growth at 41% has seen time share decline three percentage points to reach 13%.

The background

Netflix is in an extremely strong run of form with the barnstorming global success of improbable hit Squid Game, and with subscriber growth ahead of Wall Street forecasts in this week’s third quarter results.

But, as Netflix CEO Reed Hastings told investors, the company is aiming for a bigger prize:  “[A] company like Disney is still ahead of us in some of those dimensions of putting that whole experience together, but boy, are we making progress. And so exciting over the next three to five years, [to be] closing that gap and hope to pass them on that spectacular all-around experience.”

Sourced from LightShed, FT, Motley Fool. [Image: LightShed]

Audiences use an average of five video streaming services

Audiences use an average of five video streaming services and this number is steadily increasing, according to the latest data from media analysts Omdia.

Why it matters

Video streaming is getting more competitive as new services launch and more content is being distributed. While audiences are steadily using more, services may need to start focusing on new audience segments, like older consumers, to continue their growth.

Consumers using more video services also adds complexity to the challenge of measuring audience behaviour, particularly as audiences are also watching on more devices.

Takeaways

• Across the seven markets surveyed, online video audiences use an average of 4.82 advertising video-on-demand (AVOD) and subscription video-on-demand (SVOD) services, up from 4.54 last year.
• Usage is highest in the United States, at 7.06, but this has fallen for the first time.

Sourced from Omdia, WARC Data

Social commerce continues surging in SEA: Report

Even as COVID-19 restrictions ease in parts of Southeast Asia, the pace of growth for social commerce shows little sign of slowing and more people are spending more of their time discovering, considering and purchasing products within the social media ecosystem, according to iKala's “Riding the Pandemic Wave & Beyond” report.

Why it matters

Friction and inconvenience, as well as scams and risks, have left shoppers frustrated and less trusting of social commerce and, in order to succeed, brands and social sellers need strategies, tools and technologies that smoothen the customer experience and put customers at the centre of everything they do.

Key insights

• Social commerce orders and gross merchandise value nearly doubled in the first half of 2021 compared to the same period the previous year.
• Consumer preference for social commerce (78%) surpassed traditional retail (35%) and is second only to e-commerce (91%)
• Revenue per order was up 88% during the period, meaning consumers are not just shopping more but also spending more on each order.
• Pain points for SEA consumers are expensive shipping (51%), no return and exchange policies (41%), and a lack of customer service (34%).
• Payment preferences vary – consumers in Singapore and Malaysia prefer credit cards and digital wallets respectively; Thailand and the Philippines like cash on delivery.
• Consumers seeking convenience and value turned to social media for food and beverage (46%), and groceries (32%) in the first half of 2021.
• Consumers’ appetite for F&B and grocery shopping is especially high in Malaysia (53% and 38% respectively), and Thailand (50% and 32%).
• A big reason for this is the on-again-off-again lockdowns in the region, which prompted people to go online for their essentials but it’s a trend that’s here to stay.

Background

The annual research report by AI solutions firm iKala surveyed 1,600 social shoppers and more than 23,600 social sellers across Thailand, Malaysia, the Philippines and Singapore to identify emerging trends in the region’s social commerce space.

Customer Experience: The economic value is significant

Firms that lead in customer experience (CX) outperform those that lag by a more than 3-to-1 margin in shareholder return, according to leading customer experience consultancy firm, Watermark Consulting. 

Why it matters

The  firm analysed shareholder returns for companies identified as CX Leaders and CX Laggards in third-party customer experience rankings. The results highlight a competitive opportunity. While things like product innovation and technology advances can be copied, it’s far harder for rivals to effectively replicate a great customer experience (and the internal ecosystem supporting it). This can deliver significant strategic and economic value to a business.

Takeaways 

• Widely loved brands with strong consumer feedback ratings enjoyed an average shareholder return that was nearly 110 points higher than the market index, while widely loathed ones lagged by an almost identical margin.
• Companies that consistently impress customers reap rewards – through increased loyalty, greater wallet share, stronger word-of-mouth, and a more competitive cost structure.

Key quote 

“Many companies excel in frustrating their customers, whether it’s from a complicated purchase process, unintelligible assembly instructions, difficult-to-use products, hidden fees, long lines, or just plain poor service. Our study reveals that businesses eventually pay a price for subjecting consumers to such indignities” – Jon Picoult, founder and principal of Watermark Consulting. 

Sourced from Watermark Consulting

Tesco joins the checkout-free rush

Tesco is the latest UK supermarket to experiment with a store format that lets consumers shop and pay without scanning goods or using a checkout. 

Shoppers check into the central London GetGo store by scanning a QR code generated by the Tesco.com app on their phone. Their movement in-store is monitored by an artificial intelligence (AI) system that uses cameras and weight sensors in the shelves to track what items are picked up with the final bill being charged to the customer’s Tesco account when they leave.

Why it matters

Such stores are not going to replace the existing array of formats, but UK supermarkets are wary of the threat posed by Amazon which has pioneered the till-free store and now has six in London with at least four more in the pipeline. Supermarkets Morrisons and Aldi are also working on a similar concept. 

Takeaways

• Supermarket chain Sainsbury’s decided two years ago its customers weren’t ready for such a store but it may rethink that as consumer expectations of grocery shopping have changed during the past 18 months.
• More people now shop online and more are making use of instant delivery services (Tesco is expanding Whoosh, its one-hour delivery offer). 
• When marketers talk about a seamless customer experience, the till-free grocery store surely exemplifies that.

Sourced from Guardian, Telegraph [Image: Retail Week]

What ROI should you expect?

A new analysis of WARC’s database outlines the returns on investment (ROI) marketers can expect from successful advertising campaigns: the median profit ROI is 2.26:1 (every dollar invested brings an additional $2.26 of net profit having excluded the cost of the campaign in the calculation).

Why it matters

Profit-based ROI (also known as ROMI or payback) can be a useful measure because it allows you to compare the efficiency of different campaigns with different budgets. It also allows you to compare the return from your campaign with the returns from alternative investments. However, as an industry, marketing has misused ROI, mistaking it for a goal instead of a measure of efficiency.

Takeaways

• Low-budget campaigns have the highest average ROI ratios, as they need to deliver a much lower absolute return to generate a stronger ROI ratio.
• Among global successful campaigns, the median revenue ROI is 4.00:1. Interestingly, this is a similar figure to the average revenue ROI from UK cases that weren’t submitted to an award (£3.80), according to recent research from Magic Numbers.

Read more in Benchmarking ROI using successful campaigns