TV ad model: Dead:
Television as we knew it died this week at 73. Or at least the advertising model did. Boomers and Generation X won’t have to quit ad blocks cold turkey but they will note that a growing percentage of what they see will be ads for retirement villages and Cialis. The kids, which in this case means anyone under 34, are moving online and the money is going with them.
Commercials started with a 10-second spot for Bulova watches during a baseball game in 1941. The death blow came yesterday during PepsiCo’s (PEP) conference call when CEO Indra Nooyi said her company’s ad budget would stay at 5.9% of revenues but be “reallocated.” A Pepsi spokesperson tells Yahoo Finance that means “reallocated to consumer facing activities.” I read that to mean moving ads off television and into other formats.
5.9% of PepsiCo’s 2014 revenues works out to roughly $3.9 billion. They’re the company that brought us Katy Perry and Left Shark, for God’s sake. Sports was the last great hope for ads and one of its biggest backers is drawing the line. There’s nothing in Indra Nooyi’s history to suggest she’s bluffing.
But don’t take PepsiCo’s word for it. Omnicom Media (OMC) which positions some $50 billion worth of ads a year for not just Pepsi but Apple (AAPL), McDonald’s (MCD) and Starbucks (SBUX) advised its clients to shift 25% of their budgets away from TV last year.
You live in a transitional time, to be sure.