Television advertising has stood the test of time. Despite the surging popularity of social media and online streaming services, spending on television advertising has not fallen below the $60 billion dollar mark since 2011.
Though spending in North America dropped six percent from 2019 to 2020, television still remains one of the most popular means of advertising.
History of Television Advertising
The first official paid TV commercial in the United States premiered on July 1, 1941 on a New York station before a baseball game between the Brooklyn Dodgers and Philadelphia Phillies. The 10-second commercial for Bulova watches cost the company less than $9.00.
Early in TV advertising, agencies tended to produce both the programming and the advertising. For example, Westinghouse, sponsor of "The Adventures of Ozzie and Harriet," wanted scenes set in the kitchen in order to show off their brand of appliances.
In the postwar decades, networks assumed greater control of programming, and the single sponsors of early TV shows gave way to multiple sponsorship, which meant less of a connection between the ads and the entertainment.
This era was also the advent of live performance television ads. During the show, one of the cameras would be wheeled over to the side of the stage where a live presenter would pitch the sponsor's product.
By the mid-1950s, film overtook and replaced live TV commercials. This allowed advertisers to produce commercials featuring cartoons and other cinematic imagery.
In the 60s and 70s, fanciful TV commercials gave way to a focus on gender and ethnicity in response to societal movements of the time, including civil rights and feminism.
By the mid-1980s, advertising agencies started making 15-second television commercials, hoping to maximize the ad effectiveness and profits. Doing these 15-second TV ads allowed advertisers to run greater quantity, increasing frequency and profits while decreasing cost.
In the 90s, we welcomed the internet, opening up a whole other form of media for advertisers. Ironically, much of the $6.5 billion spent by dot-com companies between February 1998 and October 2000 went toward traditional advertising media like TV.
In the 2000s, streaming platforms like Hulu, Netflix and Sling allowed advertisers to target to even more specific audiences. People interested in food watch cooking programs; nature lovers watch the National Geographic channel; sports fans watch ESPN. Social media advertising has grown exponentially. With these avenues, advertisers can gain better measurement capabilities through real-time analytics.
What’s involved in TV advertising?
Advertising on television involves two main components: production and distribution. Production costs involve the expense of creating the actual TV ad, such as hiring an ad agency and professional production crew. TV ad distribution is the process of placing advertisements on television.
Here are some of the factors involved in TV advertising costs:
TV Ad Production
If you're producing a national TV ad, you may outsource the work to an ad agency or other professional firm. In addition to production costs such as concepting, scripting, hiring talent, shooting, editing and producing, they'll tack on an agency fee, which can be anywhere from 15-30 percent.
Local television stations usually have an in-house production company that can write and produce advertisements. They can also help advertisers determine the demographic for the ad and, in turn, the channels, day of week, time of day and frequency in which your ad should air. They will sometimes work the cost to produce the commercial into the cost of your ad spots, especially if you are planning to spend money over a long period of time.
TV Ad Distribution
As mentioned, TV ad distribution is the process of placing advertisements on television. Once a company has created an advertisement, the science of choosing how, when, the frequency, and through which channels to distribute the content will make the difference in it’s success.
Demographics is also a large factor in TV ad distribution, including age, gender, interests, location and more.
Media buyers are experts in this phase and can target audiences appropriately. They should be able to discuss metrics on viewers and ad placement and how the success of the spot will be measured.
What determines TV advertising costs?
There are a number of factors that determine the cost of broadcasting a TV commercial. Such variables include:
CPM stands for cost per thousand impressions. This metric is the cost of the media, divided by the number of impressions the TV commercial delivers, all multiplied by a factor of one thousand.
Qualitative research, which relies on question and answer surveys of a limited number of respondents, will estimate the size of a TV station audience in total and during each time segment. The station will use that research to set CPM rates for its advertising.
For instance, a local TV station receives survey results showing that it has an estimated audience of 200,000 viewers.
The station will sell a campaign to an advertiser that reaches 20,000 of those viewers with a commercial that airs during certain time periods. It charges the advertiser $500 for the ad campaign. The CPM is $25 using the formula $500 = (20,000 / 1,000) * $25.
The length of the TV ad influences the price, but the best TV commercial length really depends on the message you’re trying to convey to your audience. Most commercials are either 15, 30 or 60 seconds in length. Today, 15 seconds is the standard length for a television ad.
A single episode of a one-hour network TV show typically lasts about 45 minutes, leaving roughly 15 minutes of airtime for commercials. In these approximately 15 minutes of commercial time, a viewer may witness anywhere from under 10 to as many as 60 commercials. The number of commercials broadcast during a 60-minute show all depends on the length of the ad blocks that have been purchased.
National TV advertising is more expensive than local TV advertising. Although some of the biggest brands may spend millions of dollars for a 30-second spot during the Super Bowl, a more routine number would be in the six-figure range for 30 seconds on national TV.
Conversely, local TV can be surprisingly economical. If you are a local or regional company, you don't need to advertise outside of your market. According to data from Skyworks Marketing, the average local TV commercial runs $5-$10 per 1,000 views.
Time of Day
Prime time ad spots are in the evening between 8 p.m. and 11 p.m., when most people are watching TV. Given the expanded viewership, the cost of TV ads run during this period is typically higher than other times of the day.
Other popular times to run ads, especially local ones, are during newscasts. However, this also varies by your product or message. If you're selling a toy, you may choose Saturday morning cartoons; if you're selling alcohol, you may choose a sporting event or happy hour time frame.
A local commercial on a local station at 2 a.m. can run as cheap at $25 per 30 seconds. However, 2 in the morning may not be the best time to advertise your product or service, even though it can be inexpensive.
Time of Year
If there’s a highly contested political race coming up, candidates will be willing to pay a higher than usual price for TV advertising. Other events, such as anticipated sporting events (e.g., the Olympic Games or the Super Bowl), can also drive up costs. Advertising costs sometimes decrease after the holidays and into the New Year, depending on the market.
Broadcast vs. Cable
Broadcast TV is all your local channels (ABC, NBC, FOX, etc.). Because everyone has access to broadcast, your TV ads will be visible to more people. Of course, this means you cannot target your advertising, but if your goal is general brand awareness, this could be a good fit.
Cable is all the channels you have to pay for, such as MTV, HGTV, Science Channel, etc. TV shows that air on cable can attract a particular audience – and usually has a much smaller reach than advertising on broadcast TV.
For example, there is a big difference between the interests of those who watch HGTV and those who watch MTV. So if you’re trying to target a very specific demographic or group and have a limited budget, cable may be your best option.
There are typically four commercial breaks in a half-hour show, each lasting two minutes (equivalent to 16, 30-second commercials). With a limited number of ad spots available, the more demand there is, the higher the price.
The cost for ad during the Super Bowl, for example, can vary depending on whether it's a pre-game, end of quarter, halftime or end of game time slot. This is due to the fact that demand is higher in the first half of the game through halftime. If one team is beating the other handily, viewership may decline in the second half.
Reach and Frequency
Reach is defined as the estimated number of potential consumers who could see your specific campaign or advertising medium. For example, if a furniture company wanted to broadcast a series of promotional spots on a local TV station, then the company's market reach would include all of the viewers in the area that regularly tune in to that channel.
Maximizing reach is often considered an effective strategy to use when announcing a new product, service, sale, seasonal event, etc. after a brand is already established within a market or if the level of local competition with that brand is relatively low.
Frequency measures how many times each unique consumer (or "user") views an ad within a predefined time frame. Frequency is typically expressed in terms of an impression to time ratio. For example, eight impressions on a single user within a 24-hour period would yield a frequency rate of 8/24.
If you’re promoting a special event (i.e., a sale or limited time offer), your campaign should focus more on frequency to get your message in front of your customers as many times as possible.
Average Cost of a TV Commercial
Television advertising costs vary widely depending on the factors mentioned above. A 30-second TV commercial cost $5.5 million during the 2021 Super Bowl. For local television stations, advertisers can expect to pay a minimum of $5 per 1,000 viewers for a 30-second TV commercial. Based on data provided by Ad Age, a global news, analysis, marketing and media publication, a 30-second spot broadcast nationally averaged around $115,000 in 2020.
Is TV still effective?
Despite the influx and variety of digital media available, traditional broadcast television is still very much a part of everyday life.
While daily viewership might not be drastically increasing, it's far from dropping significantly. According to Nielsen in its 2020 Total Audience Report, TV viewing among adults ages 18 and older dropped five percent in Q4 2020 compared to 2018; however, it was up from 2019. The effects of the pandemic may have helped contribute to the increase in viewership by the latter half of 2020.
And while people are now watching television differently - on multiple devices, across multiple networks and on demand services - this monster of a medium still presents an opportunity for advertisers to better target their messages to captive audiences everywhere.