Digital ad spending streams past traditional TV

This week, media executives have been busy trying to impress advertisers at the annual “upfronts,” where major TV networks showcase their stars, new programs and the potential size of their audiences.

It’s a show in its own right. “Tonight Show” host Jimmy Fallon did his version of Beyonce’s “Texas Hold ‘Em” at NBC’s upfront Monday.

But this year, Big Tech is looking to cash in. Marketplace’s Lily Jamali spoke about it with Reuters reporter Sheila Dang, who said ad spending on digital has surpassed that of traditional TV for the first time.

The following is an edited transcript of their conversation.

Sheila Dang: So decades ago, it used to be only the major broadcast networks like NBC, ABC, CBS that hosted these presentations and trotted out their prime-time TV shows. But it’s really changed, and fast-forward to this year, Amazon is hosting its first upfront this week for its Prime Video streaming platform. And Netflix is in its second year of the upfronts. So we are definitely seeing a shift toward new streaming companies, and even tech companies are getting into this game.

Lily Jamali: Yeah, and a “harsh economic reality looms off stage,” as you write. The fact that digital video ads have now eclipsed TV ads in terms of spending, this has been a long time coming, it sounds like.

Dang: Yes, there has been a yearslong shift in the viewing habits of people watching on linear traditional TV now moving toward services like YouTube and Netflix and even TikTok with short-form video. An ad-measurement firm called Guideline estimated last month that ad spending on these digital video platforms is eclipsing traditional TV for the first time ever. And that is only going to continue to grow. So this puts the media companies under a lot of pressure, especially this week, as they are trying to convince major advertisers to spend with them.

Jamali: Yeah, there’s no turning back. And if you’re a Fox or an NBC, that’s gotta be putting a pretty big damper on the mood right now.

Dang: Yes, and this is showing up in their earnings results as well. So companies like Disney, Comcast, those companies own traditional TV networks, and they are seeing a decline in their ad revenue. And these companies have launched streaming services to try to keep up with the shift that we are all seeing in viewing habits. But that growth isn’t happening quickly enough to really make up for the decline that they’re seeing in traditional TV.

Jamali: Yeah. And when we talk about traditional TV, I’m thinking of shows like “Seinfeld,” “Cheers.” I’m just picking some of my favorites, I’m sure you have your own. These shows that, back in the day, tens of millions of us watched all at the same time on a given night. And, you know, Jerry Seinfeld, since I mentioned him, happens to be working mostly for Netflix these days. And yet the streamers, as you kind of alluded to a moment ago, don’t seem to be making all the money that once went to advertising on some of those shows, on some of those traditional networks. Why is that?

Dang: So one problem is that there is a lot of fatigue among viewers to subscribe to every streaming platform that is available today. There’s a lot of fatigue to pay for these individual streaming services. And for advertisers, the issue that they’re facing is people are not watching consistently at the same time. So when they are trying to reach a really broad or large audience, that still remains a little bit difficult to do on streaming platforms. So that is the reason why one of the last remaining advantages for traditional broadcast TV is live sports, because people are still coming together to watch the Super Bowl or the Olympics, and that is still generating millions of viewers at the same time.

Jamali: Are there any examples of an advertiser or a particular product that an advertiser is hawking these days where you see them just, you know, either really paring back on TV or just skipping TV altogether in favor of digital?

Dang: So there are two examples that I reported last month: Intel and Bridgestone. They are two sponsors of the Paris Olympics this summer, and instead of airing commercials on NBC, which broadcasts the Olympics in the U.S., both of those companies have decided that they are going to completely skip TV and instead put their marketing on social media or YouTube or even work with influencers to help spread their messages. So for instance, Bridgestone filmed a video about how its rubber technology can help improve wheelchair performance for Paralympic athletes. Bridgestone said that they do not plan to air [the] commercial during the Olympics. But instead they’ve posted the video online to YouTube and Instagram. And that just reflects how some major brands are seeing more value in going on digital or social media.

Jamali: So it sounds like it’s a combination of this is cheaper and potentially we get more bang for our buck.

Dang: Yes, it is a lot more cost-effective to put ads on social media and digital and potentially reach younger audiences who might not be watching TV anyway.

Jamali: Finally, Sheila, what are media companies, those traditional, old guard companies that we talked about, what are they doing to try to hold on to whatever ad dollars they can still get their hands on?

Dang: One way that these traditional media companies are trying to keep up is they are partnering with Big Tech giants in order to sell ads. So for example, Google announced a few weeks ago that it would partner with media companies like Paramount and Warner Bros. Discovery. And advertisers can actually use Google’s tools to buy ads on Paramount’s TV shows, for instance. So the advantage for the media companies is they get to open themselves up to a much larger number of potential advertisers by working with Google. And these partnerships between the tech and media companies is something that advertisers are expecting to see a lot more of during the upfront presentations this week.

More on this

It is clear that advertisers think we’re not watching enough television. The Wall Street Journal reports that’s especially true for “Gen Z, multicultural audiences, and households with children” — coveted demos they desperately want to reach.

Mondelez, the maker of Oreos and other snacks, spent zero dollars on TV ads for a limited-edition Oreo recently, which The Journal says would have been “unthinkable” just a few years ago.

There’s also this piece from the Hollywood Reporter, which notes that live sports are one of the last bright spots left for traditional TV networks and could make up more than 40% of this year’s ad spending. But according to one consultant, the networks aren’t putting much quality entertainment content on linear channels compared to, say, five years ago.