TV Advertising: The Next 10 Years

An Agency Perspective

Steve King, Chief Executive - Worldwide, ZenithOptimedia

TV Advertising: The Next 10 Years

• Global advertising forecasts

• Media trends

• Television trends

• Responding to changing times

Stable world economy

Gross Domestic Product: year-on-year % change

10.0
2005 2006 2007
9.0
8.0
7.0
6.0 5.5
5.1 5.1 5.0
4.7
5.0 4.2
3.8 4.1 3.9 4.1 4.0
4.0 3.2 3.5 3.3 3.5

3.0
2.0 1.9 2.0
2.0
1.0
0.0
WORLD N.America L.America Europe Asia Germany
Pacific

Source: ZenithOptimedia, April 2005

Adspend growing

Adspend: year-on-year % change

10.0
2005 2006 2007
9.0 8.2
8.0 7.3 7.1 7.3
6.8
7.0 6.4
6.1 6.0
6.0 5.4
5.1 5.0 4.9 4.7
5.0 4.3 4.4

4.0
3.0 2.6
2.2
2.0
0.8
1.0
0.0
WORLD N.America L.America Europe Asia Germany
Pacific

Source: ZenithOptimedia, April 2005

Ad expenditure growth by region
(% change, 2008 v 2005)

35
31
30

25
20 20
19
20 18
15
15

10

0
North Europe Asia Pacific Asia ex. Latin World
America Japan America

Source: ZenithOptimedia
Higher growth in TV adspend

TV adspend: year-on-year % change

10.0
2005 2006 2007
9.0 8.3
8.0
8.0 7.2 7.1
7.0
7.0 6.5
5.9 6.1
5.7 5.7 5.7
6.0 5.3
4.7
5.0
4.0 3.4 3.5
3.3
3.0
1.8
2.0
1.0 0.4

0.0
WORLD N.America L.America Europe Asia Germany
Pacific

Source: ZenithOptimedia, April 2005

TV gaining share

Global adspend by media type

450

400
+19%
350 38.4% TV

300
38.1%
250 +76%
+16%
$bn
200 29.8% Newspapers
36.1%
+40% 30.5%
150

100
+17% 13.4% Magazines
36.2%
13.5%
+70%
+14% 8.5% Radio
50 13.3% 8.8%
+78% +21% 5.5% Outdoor
8.3% 5.4%
6.1% +47% 3.7% 4.5% Internet
0 +44%

1994 2004 2007

Source: ZenithOptimedia, April 2005
Media adspend – declining share of marketing

Spend 2004 v 2001 % change (US, Japan, Germany, UK, France)

35.0
29.8
30.0

25.0

20.0

15.0

10.0 6.8
4.6
5.0 3.5
0.7
0.0
Media Sales Brand PR/ Direct Mail Interactive
Advertising Promotion Sponsorship Marketing

Source: Marketing Expenditure Trends Report, London Business School

Media advertising and sales promotions (USA)

Marketing budget allocation %

1976
1986
2002
Media 42%
Advertising 34%
24%

Consumer 19% 26% 27%

Promotions

Trade 39%
Promotions 40%
49%
49%

Source: John Philip Jones

Towards customer experience marketing

“Real brand marketing is not about fabricated

slogans, it’s a total approach.

We are now looking at communicating through

the line and at other ways the brand interfaces
with the driver.

That’s why we now believe we are no longer

selling cars - we are selling customer
experiences.”

President, Mazda Motors, Europe

Towards integrated marketing communications

Direct
Mail
Cellular

e-Mail Pager

Outbound
Telemarketing
PDA Sales Force
Website Fax

Custom
er

Touchpoints
Retail
Point of Sale
Face-to-Face

Behaviours

Contacts
Radio
Delivery
Fulfillment
Customers

Interactions

Phone
Television
Ordering

ATM
Magazines

Event / Placement/
Sponsorships Product
Sampling
Outdoor

Newsprint
TV Advertising: The Next 10 Years

• Global advertising forecasts

• Media trends

• Television trends

• Responding to changing times

Media trends (i) - overview

• Consumer appetite for media is rising

(time and money)

• Advertising supported media are losing share to

consumer supported media

• TV remains dominant

• Growth media include internet, direct mail, email,

mobile, retail, PR

• Growing use of multiple traditional and non-

traditional media
Media trends (ii) – media consumption

% share of the average person’s media time

3 Mobile Phone
Radio
Internet
2
Home PC
Cinema
1 Music
+/-
% Television
0
by Magazines
2007
-1 Books

-2 Newspapers

-3
0 10 20 30 40 50 60

% share of time

Source: ZenithOptimedia
Media trends (iii) – media reach

2005
Personal
2015
Communication

Mobile
internet E-mail

PC
Internet

Low reach High reach

Digital Print
TV
Radio Analogue
TV
Mass
Cinema Communication
Posters
Source: ZenithOptimedia
TV Advertising: The Next 10 Years

• Global advertising forecasts

• Media trends

• Television trends

• Responding to changing times

TV - The Next 10 Years

• Potential for a new golden era: more viewing, more

enjoyment, more attention

• Rising penetration of multi-channel TV

• Digital TV replacing analogue TV

• Growing popularity of interactive TV

• Rapid growth in DVR penetration (replacing VCR)

Digital TV penetration in Europe

Digital Households as % of All Households

%
60 59

50
45

40 37
34
29
30
22 23
20 18

10

K*
y

nd
ce

ay
en
*

al

ai
y*

an

U
a
ed
It

Sp

el
an

or
Fr

Sw

Ir

N
m
er
G

Sources: *Sky, **AGF/GfK Fernsehforschung,

Jupiter Research
TV distribution platforms in Europe

% of All TV Housholds
%
100
7
14 15 14
13

75 18
54
33
70

50
80
80
38 67
25 42
26
15
4 5
0
USA Germany UK France Spain Italy

terrestrial digital terrestrial analogue Satellite Cable

Source: Booz Allen Hamilton 2005

Growth of free digital terrestrial TV

Homes % penetration

100
UK
90
80
70
60
Germany
50
40

30 Spain

20 Italy
France
10

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: ZenithOptimedia, Television in Western Europe to 2012,

Growth of pay digital TV

Homes % penetration

100
90
80
70
60 France
50 UK
40

30 Spain
Italy
20
Germany
10

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: ZenithOptimedia, Television in Western Europe to 2012,

The value of time

“Time management has become the most important

driver of social change and innovation.
Nearly all technological and social innovations over
the last 50 years can be attributed to a desire to
maximise use of time.
They can do this in two ways: either by increasing the
satisfaction gained from any given unit of time or by
reducing the amount of time to achieve the same
amount of satisfaction.”
The Future Foundation, April 2004
Digital Video Recorders

• A vital TV innovation

• 50% penetration in US/UK by 2012

- US: 8m homes currently
- UK: 770,000 DVR homes watching 16% more TV

• Significant change to viewing behaviour

- 40% of viewing to recorded programming. 73% of ads fast
forwarded
- More attentive, enjoyable, selective viewing
- Despite fewer ads viewed, no fall in ad recall (source: Sky)

• Challenges and opportunities for advertisers

The Changing Face of ‘Advertising’ on TV

100

90

80

70
Classical Ads
60

50

40
Gaming
30 Interactive Ads
20 Branded Content

10
Special Ads
0
2000 2005 2006 2008 2009 2011 2013 2015
Source: ZenithOptimedia
The value of attention

• People are more likely to watch

if they choose the programme,
and are interested in it and
enjoy it

• People recall more ads in

programmes they are attentive
to

• GRPs are not a good surrogate

for attention or recall
What people do during ad breaks

Activities during ad breaks

Pay full
attention to ads
5%

Leave room
31%

Do other things
like chat or read
Switch 54%
channels
10%

Source: ZenithOptimedia, TV Persistence Study, UK

What people remember from ad breaks

Break advertising recall (15 minutes after the programme)

Spontaneous
1%
Prompted
18%

No recall
81%

Source: ZenithOptimedia, TV Persistence Study, UK

Source: Zenith Media TV Persistence Study (March/April 1999)
Viewing persistence effect on ad recall

Ad recall index vs average

AMOUNT OF THE PROGRAMME VIEWED

Almost none A little Half / Most All

+63% 114
102

76

50

Source: ZenithOptimedia, TV Persistence Study, UK

Integrating marketing communications

Direct Mass
Generating Creating
Media response awareness media
TV

Enhancing
experience

Interactive
Media
TV sales – the next 10 years

1. Helping clients to build awareness, generate

response, enhance experience

2. Proving ROI from TV advertising – value versus

alternatives

3. Programming that is viewed live

4. Improving the trading currency – passive

measurement

5. Beyond the GRP – attention, engagement,

response
The next 10 years

• Global advertising forecasts

• Media trends

• Television trends

• Responding to changing times

Responding to changing times

The Future Structure of the Media Services Sector

• Media unbundling almost complete - scale in media

even more important

• 5 or 6 multiple brand media services groups

accounting for 60% - 70% of world adspend

• Human endeavour - servicing and ideas will be key

discriminators

• Developing communications planners at the heart of

our integrated media communications service
Summary

• Advertising expenditure continues to grow as % of GDP

and TV spend is growing share of adspend

• Media advertising losing share of marketing spend

• The potential of a golden era for television – more

choice, enjoyment, attention, and involvement

• New forms of advertising on TV

• Media agencies are moving to become communications

advisors