It’s the 21st century. Is advertising on local TV worth it anymore?
The Internet is in the palm of our hands. Our Roku streaming stick is on our travel checklist. And instant video streaming is just a thumb tap away.
“Right here, right now” culture makes it hard to see where traditional TV fits in for advertisers.
Before you navigate local TV advertising in an increasingly post-TV world, contact our digital advertising experts at LiftIntent.
In this article, we will answer the questions every advertiser needs to know before advertising on local TV . . .
- How much does local TV advertising cost?
- Is local TV advertising worth the investment?
- What’s the best method for consumers to receive ads?
- What other high-quality media options do advertisers have?
The fall of linear television
Once a year, networks and marketers gather under sweeping canopies to indulge in sparkling champagne and bite-sized hors d’oeuvres.
Marketers travel there from all over the country, while actors and actresses speak from the season’s most popular broadcast TV shows.
The lavish event has one goal: to pry open pocketbooks and gather promises in the form of billions of dollars for the next advertising year.
And yet, despite the checkbooks and eloquent speeches, cracks in the foundation are beginning to show.
The truth is, the number of devices and app downloads are causing a significant dent in television ratings.
According to Magna Data, national TV ad sales peaked at $43 billion in 2016. However, 2017 was met with a 2.2 percent loss totaling 1 billion dollars.
Forecasters estimate that revenue will continue to fall at a 2% rate through 2022, for a ten-year low.
Vincent Letang, executive vice-president of Magna Data’s global market intelligence, says that the industry could revive through partnerships with over-the-top (OTT) channels like Netflix and Hulu. However, the slow fall may have not yet disrupted enough of traditional network sales.
Why traditional TV is in trouble
The TV generation gap
According to the latest Total Audience Report from Nielsen, television is the most used electronic medium in the U.S. Yes, even over our smartphones!
While traditional broadcast television is certainly still relevant, Neilsen’s data reveals a clear gap in TV consumption.
- People aged 50 and older spend nearly 6 to 7+ hours a day watching TV.
- 18-34 year-olds, on the other hand, watch 40% less, at just 2 hours a day.
The steepest decline, however, falls with teens aged 12-17, who spent 10% less time watching TV this year than they did last year.
EMarketer further predicts that TV viewership will fall 3% across all ages in the next few years, sinking to a 3 hour and 40-minute average.
Cord-cutters and cord-nevers are rising.
TV viewership across all age groups has gradually fallen since its peak in 2010. But viewers aren’t just spending less time watching pay TV, Americans of all ages are choosing to cut the cord.
The number of cord-cutters is expected to grow by 15.5% by 2020, reaching an astounding 25 million households. But that’s not all!
An impressive 31 million Americans have never even had a TV subscription. These cord-nevers represent a significant 12% of the population.
Together, the number of U.S. households waiving pay-TV services has climbed past 40 million in 2019 – representing a 19.2% year-over-year increase.
This figure will rise to 56 million by 2023, further closing the gap between the 72 million households that will still have pay TV.
Networks are responding to the drop in viewership and TV households with higher subscriptions and ad prices.
But eMarketer states that higher subscriptions for consumers are also a reason for the acceleration of cord-cutting rates.
Loss of primetime viewers
- 2014-2015: 35.8 million primetime viewers
- 2018: Homes with satellite, cable, or telco service fell to 78%
- 2018: Three-fourths of U.S. homes have streaming services
- 2018-2019: 28.5 million primetime viewers (20% decline)
Cord-cutting and the rise of streaming services help explain the gradual yet consistent slide in Nielsen numbers.
According to Nielsen data, the 2014-2015 TV season attracted an impressive 35.8 million viewers in primetime.
But as the number of satellite and cable services drop to 78% and streaming services rise to three-fourths of U.S. homes, primetime viewing numbers are exponentially affected.
In just four years, networks and advertisers experienced a 20% viewer decline (7.8 million) – averaging 28.5 million primetime viewers. The loss of adult viewers was even steeper this year, earning just a 6.2 rating while falling below 35%.
Big-name brands pull the plug on broadcast TV
The shift in the market has even caused big-name brands to pull the plug on traditional TV.
In an interview with CNBC, Adidas Chief Executive Kasper Rorsted said the company wants to boost eCommerce revenues from $1 billion in 2016 to over $4 billion by 2020. How will they get there? Digital marketing.
“It’s clear that the younger consumer engages with us predominantly over the mobile device. Digital engagement is key to us – you don’t see TV advertising anymore,” Kasper said.
A shift toward digital doesn’t mean they have cut TV advertising entirely out of their marketing budget. However, their total ad spend has dramatically decreased in favor of partnerships, digital, advertising, point-of-sale, and “grassroots” activations
Ad costs are rising
One of the most common questions advertisers ask is, “How much does local TV advertising cost?”
Local cable TV advertising rates can vary based on several factors. Location, audience, time of day/year, and the number of ad spots available are all taken into consideration.
While some sources suggest advertisers may be able to grab ad space at a $5 CMP, it probably isn’t going to be the best deal for your money. For example, an ad slot at 2 a.m. isn’t likely to get you the ROI you are looking for.
The average cost of local TV advertising on a show like Oprah could cost anywhere from $90 to $300 CPM. Local TV advertising costs for your local news will land between $200 and $1,500 per 30-second commercial.
That same commercial broadcast nationally averages around $115,000. Alternatively, placements for a 30-second Super Bowl ad can go beyond $5.25 million.
That’s a lot of money for 30-seconds of a single brand’s product! Is the ROI really worth it? Let’s take a closer look.
ROI of local TV advertising costs
Calculating the ROI on local TV advertising is nearly impossible.
Because your conversions are not connected to the viewer’s real-time shopping experiences, you can never be certain it’s your TV ads that are attracting customers.
However, we’ve created a simple, yet optimistic example here.
Let’s say that:
- You invest $1 million.
- You pay $100 CPM.
- 10 million people see your ad.
- An optimistic 20% are potential customers.
- 20% of those potential customers buy your product.
- You make $1 for each purchase.
- 400,000 people buy your product, so you make $400,000.
- Your ROI is -60% of your TV ad investment.
That’s a lot of money to spend on a 30-second advertisement that may or may not be seen, and our cost was conservative and our conversions were optimistic!
Plus, we already know that 12-34 year-olds aren’t particularly interested in watching broadcast TV, so it’s likely that you will miss out on an entire demographic.
Is advertising on local cable TV worth the investment?
The question remains, is advertising on local TV worth it?
With the popularity of Hulu, Netflix, Amazon Prime, and YouTube TV, it may be tempting to imagine that tech giants destroyed TV as we know it.
But we won’t say that TV is entirely irrelevant yet.
While the rising ad prices and falling viewership have caused some brands to pause, others find that local TV advertising rates are still a good value.
Specifically, personal care products and pharmaceuticals are increasing their presence on television.
The shift is likely due to the fact that the hottest TV networks – those that earn the highest ad prices – are shifting toward older viewers.
For example, last year’s top-rated broadcast television show, the revival of Roseanne, attracts a median viewer age of 52.9 years. Riverdale has the lowest median age, at just 37.2 years.
However, those looking to target a younger demographic or lower CPM may choose to turn toward other high-quality media.
Marketing to millennials
A decade ago, a twenty-second television ad was a coveted product in advertising.
Today, the introduction of new devices and apps has made advertising on local TV less relevant to viewers of all ages.
In a study conducted by Arris . . .
84% of surveyors admitted that they want to fast-forward through TV ads. 60% of viewers said they would make an effort to download programs that allowed them to avoid TV advertisements.
As younger generations lean toward instant-access streaming via Smart TV’s and Roku devices, businesses are struggling to reach them through traditional means.
Millennials are quickly overtaking their predecessors as the largest purchasing power on the planet right now. Therefore, small and large businesses can’t afford to miss out on marketing to this younger generation.
- Millennials account for 83.1 million of the U.S. population. (U.S. Census Bureau)
- Millennial purchasing power is expected to reach $1.4 trillion by 2020.
- Millennials spend more time on apps and the Internet than they do watching TV. (Marketing Charts)
- Millennials spend two-thirds as much time on entertainment as Generation X and Baby Boomers do. (BLS).
Alternatives to local TV advertising
Do you use your commercial breaks to grab a beer from the fridge, refill snacks, or run to the bathroom?
Even those who stay on the couch aren’t really watching the commercials. Instead, they spend their time checking their email or browsing social media.
If you’re like 87% of consumers, you use more than one device at a time.
Unfortunately, ads on broadcast TV are still stuck in the one-device era and may not be the best use of your hard-earned advertising bucks.
If advertising on local TV doesn’t fit your advertising budget, try these more targeted, non-disruptive means of real-time advertising.
Connected TV advertising
There’s no doubt about it – connected TV (CTV) is the hottest thing in advertising right now. And if you want to advertise on local TV but can’t afford to, it’s the next best choice.
Data reveals that connected TV advertising averages a $20 CPM. Plus, because it’s connected to the Internet, you get high-quality digital insights without compromising on large-screen video.
As technology advances, the lines between video and digital video consumption start to blur. In cases such as connected TV advertising, they are completely erased.
If local TV is out of your budget, or you are merely looking for a more targeted local TV advertising alternative, CTV ads are the next best choice.
Other than the fact that CTV is a significant contributor to the slope in broadcast revenue, here are the best reasons to marry the precision of digital advertising with the power of linear TV commercials.
- There are over 820 million CTV’s in the U.S. (VBA)
- 47% of U.S. households with Wi-Fi also own a streaming box. (Marketing Charts)
- 71% of Internet subscribers also use OTT services. (VBA)
- Internet users with OTT access video with three different devices and on three different OTT channels. (OpenX)
- Over 55 million people will no longer watch traditional pay-TV by the year 2022. (EMarketer)
Online video advertising
No, it isn’t your imagination. Spending time on the Internet today is watching an endless loop of videos.
It’s not difficult to see why online video advertising is a dominating force in the digital marketing universe. Attention spans are dwindling, and the majority of people stare at small screens they carry around with them all day.
Emulating a video that is both concise, informative, and interesting to your consumers can have a significant impact on your ROI.
In today’s social world, there are a variety of high-quality platforms for your digital fluid content. Consider the popular online video advertising choices below.
Live video streaming
Snapchat is one of the fastest-growing social media channels. Plus, its claim-to-fame is based on video stories.
The brand was so effective, in fact, that Instagram and Facebook rolled out similar features.
Live video streaming is a great way to get local consumers to learn more about and follow your brand’s day-to-day activities.
Over 1 billion hours of video are watched on YouTube every single day. That’s a lot of opportunities to get locally targeted, face-to-face action with your brand!
The popularity of YouTube advertising can be attributed to its easily accessible, short-form content that is enjoyed across mobile smart devices.
Whether you are marketing content or clickable video advertisements, YouTube is a great way to meet local consumers where they are already spending time.
If you want to jump on the latest marketing craze, consider getting the word out with TikTok Advertising.
TikTok is a short-form mobile app that is widely popular with Gen Z. It only launched a beta version of its managed platform with biddable ads a few months ago, but it’s clear that it’s incredibly young user base is growing faster than ever.
If your brand needs to get in with the younger generation, this could just be the place to do it.
When you want to target individual households and businesses with exceptional marketing precision, addressable geofencing is your best bet.
Addressable geofencing involves the placement of a virtual fence around up to 1 million addresses. This allows advertisers to target their consumers at individual physical addresses, across all devices, with the utmost accuracy and efficiency.
Geofencing has the added benefit of integrating with your existing campaigns. Whether you want to target your customers via PPC, Facebook Ads, or even Snapchat, you can do it with a geofence.
Not only is geofencing more targeted, it is cheaper than local TV advertising costs. For example, Snapchat charges around $5 for a 20,000 square-foot area.
Local TV advertising alternatives from the experts
Local TV advertising with linear television may be on its way out. But that doesn’t mean you have to miss out on opportunities to promote your brand on rich video streams.
Connected TV advertising and online video advertising are just some of the rapidly-growing, high-quality video options available to advertisers. Plus, these alternative methods are relevant, affordable, and becoming increasingly common across small and large screens.
Both long and short-form content allows advertisers to play with highly-targeted ads in different forms. Additionally, advertisers benefit from both of these methods being connected to the Internet, giving brands the freedom to target hyper-local demographics and gain valuable insights not offered on linear TV.
If you have questions about how an alternative to local TV advertising will benefit your brand, contact our industry experts at LiftIntent.