TV ‘safest’ ad investment

The study ‘Profit Ability: the business case for advertising’ has, for the first time, quantified the total profit generated by different forms of advertising to show what they deliver to the bottom line.

It found that all forms of advertising create profit to varying degrees in both the short and long term. On average, advertising creates a total profit return on investment (ROI) of £3.24 per pound spent over three years.

The study analysed more than 2,000 advertising campaigns across 11 categories. It looked at the impact on short-term profit (within three to six months of a campaign finishing), and combined these learnings with results for profit generated over the longer term (up to three years) to determine total profit return.

It found that TV was the ‘safest’ (lowest risk) ad investment a business can make, with the highest likelihood of profit return.

TV ads were responsible for 71% of total advertising-generated profit at an average profit ROI over three years of £4.20 for every pound spent, followed by print (which accounts for 18% of total advertising-generated profit), online video ( 4%), Out of Home ( 3%), radio ( 3%), and online display ( 1%).

Andrew Challier, chief client officer, Ebiquity, said: “The study is important because it shifts the emphasis away from the ROI number ‘arms-race’ to a more responsible approach that talks about the scalability of ROI by media channel, and the impact that this has on profit generation.”

Matt Hill, Thinkbox’s research and planning director, said: “It is crucial that we constantly refresh and update our understanding of what different forms of advertising contribute so that marketers are spending wisely.

“This study by two independent organisations with robust data at their disposal bridges the gap between the marketing and finance departments with compelling evidence that quantifies advertising’s ability to deliver shareholder value, and TV’s centrality to that.”