Profit Ability: the business case for advertising
Marketing effectiveness is in crisis NUMBER OF VERY LARGE BUSINESS EFFECTS
2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 2006
2008
2010
2012
10 YEARS ENDING Source: ‘Effectiveness in the digital era’, 2016, Binet & Field, IPA
2014
2016
Profit Ability: the business case for advertising Objectives: — Evidence for short and long-term effects — Understand the role of TV within these effects — Language of the board room: profit return and risk — Advocate the responsible use of ROI
To increase ROI, simply reduce spend 40
ROI = 8:1 ROI = 10:1
RETURN
30
20
10
0 0
1
2
3 INVEST
4
5
6
What’s the average return delivered by advertising? Independent econometric study short-term return 10 categories 150+ advertisers 1,900 campaigns long-term return 29 advertisers 500 campaigns
Short-term profit return Campaign period + 0-3 months
TV creates 62% of short-term profit at the highest efficiency (all categories) SHORT-TERM PROFIT ROI EFFICIENCY
£2.50
Bubble size represents % of short-term return
TV: 62% £2.00 Radio: 5%
Print: 22%
£1.50 Online Video: 5% £1.00
BREAK EVEN
Online Display: 2% OOH: 3%
£0.50
£0.00 0%
10%
20%
30%
40% % OF BUDGET
Source: ‘Profit Ability: the business case for advertising’, November 2017 Ebiquity ROI campaign database (Feb’14-May’17). Campaign obs: 1954
50%
60%
70%
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
Scale is fundamental to high profitability £18,000,000
TV Radio
INCREMENTAL PROFIT RETURN
£16,000,000
Press
£14,000,000
Online Video Online Display
£12,000,000
OOH
£10,000,000 £8,000,000 £6,000,000 £4,000,000 £2,000,000 £0 £0
£2,000,000
£4,000,000
£6,000,000
£8,000,000
£10,000,000
SPEND LEVEL Source: ‘Profit Ability: the business case for advertising’, Nov 2017 Ebiquity ROI campaign database. Financial Services example
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
Data science helps us optimise channels £4.00
TV
£3.50
Radio
MARGINAL PROFIT RETURN
Press £3.00
Online Video Online Display
£2.50
OOH
£2.00 £1.50 £1.00 £0.50 £0.00 £0
£2,000,000
£4,000,000
£6,000,000
£8,000,000
£10,000,000
SPEND LEVEL Source: ‘Profit Ability: the business case for advertising’, Nov 2017 Ebiquity ROI campaign database (Feb’14-May’17). Financial Services example. Campaign obs: 371
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
SHORT-TERM PROFIT ROI
Understanding the level of short-term risk by channel
£2.50
£2.50 Upper 25% £2.00
£2.00
£1.50
Middle 50% of profit ROIs with removal of outliers (inter-quartile range)
£1.50 £1.00
£1.00
£0.50
£0.50
Lower 25%
£0.00
£0.00 ALL
TV
RADIO
Source: ‘Profit Ability: the business case for advertising’, November 2017 Ebiquity ROI campaign database (Feb’14-May’17). Campaign obs: 1954
OOH
ONLINE DISPLAY
ONLINE VIDEO
SHORT-TERM PROFIT ROI
TV is the safest investment in the short-term
£2.50
£2.50
£2.00
£2.00
£1.50
£1.50
£1.00
BREAK EVEN
£0.50
£0.50
£0.00
Inter-quartile range
£0.00 ALL
TV
RADIO
Source: : ‘Profit Ability: the business case for advertising’, Nov 2017 Ebiquity ROI campaign database (Feb’14-May’17) Campaign obs: 1954
OOH
ONLINE DISPLAY
ONLINE VIDEO NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
Long-term profit return Up to 3 years post campaign
The proportion of total profit revealed by attribution modelling and econometrics
18%
Attribution modelling
42% The majority of advertising returns occur in the long-term Source: ‘Profit Ability: the business case for advertising’, November 2017 Gain Theory long-term ROI study
58%
Short-term econometrics
Long-term studies
TV has the largest long-term multiplier (all categories) 3.50 Average longterm multiplier
LONG-TERM MULTIPLIER
3.00
2.50
2.00
1.50
1.00 ALL
TV
RADIO
Source: ‘Profit Ability: the business case for advertising’, Nov 2017 Gain Theory long-term ROI study. 29 Advertisers, 504 campaigns
OOH
ONLINE DISPLAY
ONLINE VIDEO
There are no examples in the data of PPC driving long-term response
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
TV is the safest investment in the long-term (all categories) 3.00 2.80 2.60 long-term MULTIPLIER
2.40 2.20 2.00
Inter-quartile range (25% to 75% of LTM)
1.80 1.60 1.40 1.20 1.00 ALL
TV
ONLINE VIDEO
Source: ‘Profit Ability: the business case for advertising’, Nov 2017 Gain Theory long-term ROI study. 29 Advertisers, 504 campaigns
DISPLAY
OOH
RADIO
There are no examples in the data of PPC driving long-term response
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
Brand health: an aggregate view
uplift in sales consideration
+1%pt
0.5 - 1.5 %pt
Brand health: an aggregate view
10% SOV increase
5-20% decrease in price sensitivity
Total profit return Campaign period + 3 following years
Proportion of advertising-generated profit by medium
TOTAL PROFIT ROI EFFICIENCY
£5.00
Bubble size represents % of total profit
£4.50
Total profit = all return (short + long-term) generated over 3 years
£4.00 £3.50
TV: 71%
Print: 18%
£3.00
Online Video: 4%
£2.50 Radio: 3%
£2.00
OOH: 3%
£1.50 £1.00 £0.50
BREAK EVEN
Online Display: 1%
£0.00 0%
10%
20%
30%
40%
50%
60%
70%
% OF BUDGET Source: ‘Profit Ability: the business case for advertising’, Nov 2017 Ebiquity ROI campaign database (Feb’14-May’17) & Gain Theory. Campaign obs: 1,954
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
Including the long-term effect reveals the true impact of advertising INCLUDING LONGER TERM
£20.0
£20.0
£15.0
£15.0
£10.0
£10.0
£5.0
£5.0
£0.0 FMCG -£5.0
FS
RETAIL
MILLIONS
NET PROFIT (PER YEAR’S SPEND) MILLIONS
short-term ONLY
£0.0 FMCG
FS
RETAIL
-£5.0 ASSUME AVERAGE ANNUAL SPENDS FMCG (£3.1m), Financial Services (£4.8m), RETAIL (£6.5m)
Source: ‘Profit Ability: the business case for advertising’, Nov 2017 Ebiquity ROI campaign database (Feb’14-May’17) & Gain Theory. Campaign obs: 1,602
NB: Online Video includes Broadcaster VOD, YouTube, Facebook video & online programmatic video
Summary Advertising works - £3.24 profit per £1 spent Responsible ROI focusses on profit volume Plan & evaluate across the short and the longer term TV is a fundamental driver of effectiveness — Most efficient channel in the short-term — Delivers the highest long-term multiplier — The safest investment — Biggest contributor to volume of profit