Advertising’s longer term ROI more than double short term, study finds

Good news for any marketer looking to squeeze a little more money out of the CFO. A new study has found that all forms of advertising are a profitable driver of business growth, effective in both the short- and the long-term.

The study – ‘Profit Ability 2: the new business case for advertising’ – found that advertising on average has a short-term profit ROI of £1.87 per pound invested, which increases to £4.11 when sustained effects (up to 24 months) are included.

Most interestingly, the study shows that 58% of advertising’s total profit generation happens after the first 13 weeks, clearly demonstrating the case for consistency and repetition to an effective campaign.

Commissioned by Thinkbox but independently analysed, and using collective data from Ebiquity, EssenceMediacom, Gain Theory, Mindshare and Wavemaker UK, the study covers £1.8bn of media investment in the UK across 10 media channels, 141 brands and 14 categories.

The media channels include TV (linear and BVOD), generic PPC, paid social, audio, print, online video, out-of-home (OOH), online display and cinema.

It is an update and expansion of Ebiquity and Gain Theory’s original Profit Ability study from 2017, and offers the first post-Covid/Brexit view of advertising’s business performance as the prominence of digital marketing continues to rise.

Industry-wide studies like this are the lifeblood of how we move our understanding of effectiveness forwards.

Jane Christian, EssenceMediacom

Nic Pietersma, Ebiquity group director, marketing effectiveness, said he hopes the study will be the go-to reference for post-Brexit effectiveness for “many years to come”.

The dataset only includes campaigns that occurred during 2021, 2022 or 2023 to ensure that the analysis delivers an understanding of the post-Covid effectiveness landscape.

A further breakdown of the data reveals that 21% of the spend was in 2021, 32% in 2022 and 47% in 2023.

The study analysed the profit generated by advertising at different stages of its life. It examined four speeds of payback: immediate payback (within one week), short-term payback (up to 13 weeks), sustained payback (week 14 through to 24 months), and full payback (total payback 0-24 months).

Breakdown by media

The study found profitability varies by media. Thinkbox will be pleased to see that TV advertising comes out of the study well. It accounts for 54.7% of the full advertising-generated profit, with an average full profit ROI of £5.61 for every pound spent. Within this, linear TV accounts for 46.6% of full payback, and BVOD accounts for 8.2%.

Additionally, TV accounts for nearly two-thirds (63.0%) of profit payback beyond the first week of advertising. Not that its first week isn’t effective, indeed it comes second only to generic PPC for immediate payback, an impressive result, but it showcases the value of TV in long-term brand building for those who can commit to it.

The study also found that TV has the highest saturation point—the last point where every pound invested in a channel generates at least £1 profit at £330,000. Advertisers can increase their investment in TV to a higher level than other media and it will continue to generate a profitable return.

The previous study, which ran between 2014 and 2017, analysed over 2,000 advertising campaigns across 11 categories to uncover the impact of advertising on short-term profit (throughout the campaign and within 3–6 months of the campaign finishing) and results for profit generated over the longer term (up to three years on).

Since the previous study, the media channels analysed and time horizons have changed. While not an exact comparison, the previous study found that within three years, TV delivered 71% of the total profit generated by advertising and had an ROI of £4.20.

Despite only 3.3% of advertising investment going to print, the channel has the highest full payback ROI with £6.36 and the best short-term ROI with £2.74. It has a stable payback across the different stages, accounting for 4.8% of immediate payback and full payback. Comparatively, print accounted for 23% of the budget in the first study.

Generic PPC (unbranded online search), as mentioned, generates the quickest return on investment, with an immediate payback of 30.5%. However, its effects rapidly diminish after the first week, and it has a weak sustained payback of 8.8%. Overall, it has a full payback of 14.6% from an 18.9% advertising investment.

Paid social also generates a high immediate payback, with 15.1% of investment returning within one week. This slows to 8% between week 14 and 24 months.

Accounting for 6.2% of advertising investment, audio has a full payback ROI of £4.98 and an immediate payback of 8.6%, indeed it is one of the most effective channels for a short-term ROI at £2.47. Online video (which is mostly YouTube) has an average full profit ROI of £3.86 for every pound spent and accounts for 3.4% of full advertising-generated profit.

OOH gets 5% of advertising investment and accounts for 3.1% of full payback, online display (5.5%) accounts for 2.9%, and cinema (0.4%) accounts for 0.3%.

TV’s effectiveness is driven by more than just priceProfitability also varies by sector. In the automotive sector, advertising’s full profit ROI is £4.65 per pound invested. That’s more than double its profit ROI in the financial services sector, where it is £1.95.

“Industry-wide studies like this are the lifeblood of how we move our understanding of effectiveness forwards,” said Jane Christian, managing director of analytics & insight, EssenceMediacom.

“Profit Ability 2 brings our collective knowledge bang up to date and allows advertisers to make better decisions regarding their media laydowns. It provides a refreshing view on how we use channels, challenging the outdated brand vs. performance view of the world.”