The Death Of Network TV Nears: Apple, Pepsi And McD's Told To Slash Millions From Their TV Budgets

Michelle Phan, YouTubeYouTube/Michelle PhanYouTube star Michelle Phan

Omnicom Group, the global media network that oversees more than $US50 billion in annual adspend for clients such as Apple, Starbucks and Pepsi, is advising its clients to shift as much as 25% of their TV advertising budgets to online video.

The move is an admission that traditional TV budgets are under direct attack from online sources. Previously, the ad business’s official line was online video would grow alongside traditional TV. Now it seems that digital video is eating TV’s lunch.

In an interview with the Wall Street Journal, Omnicom Media Group chief executive Daryl Simm explained that online video is such an attractive proposition because there is more ability for clients to measure the effect of their advertising than traditional channels and there is more flexibility about where and when their ads run.

That money will have to be axed from network TV budgets: “Those budgets come from somewhere. They don’t just invent themselves. They don’t come from the abyss. They come from the media pot,” he says.

While Simm’s advice could set off alarm bells for some TV networks, he says a “significant portion” of that spend is diverted back to broadcasters because their content still makes up a fair proportion of the premium online video ad market.

Simm said the industry is reaching an “apex” between TV and online video advertising, as there is now more talent — “directors, producers and brands” — wanting to enter the online video space, although the amount of quality video ad inventory is still an issue.

And advertisers just aren’t as excited about TV anymore: “There is a lower level of urgency than there once was when advertisers used to say ‘I need to place these dollars right now because [ad inventory] won’t be there later.’ That is not the case today since there are so many more places to go now. I attribute it more to that than a broad scale reduction in demand [for TV].”

The global online video market is an explosive state of growth. Researchers at eMarketer recently predicted online video ad spend will overtake the amount spent on TV advertising as soon as 2018.

Last week Mondelez, the giant international food company formerly known as Kraft, signed a huge upfront global advertising deal with Google that will see it commit to spending millions of dollars with the search giant on online video in the next couple of years.

Mondelez said earlier this year that it plans to plug half of its media budget into digital advertising by 2016, after saying it drives “twice” the return of traditional TV advertising.

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