Has the threat of media inflation been overstated?

The reality is that the story around inflation is nuanced, and rarely broken down by audience, channel or platform. Let’s have a brief go at doing just that...

Linear TV

Often the main target for inflation-related commentary (yet ironically the most transparent and market-driven), the story for TV varies considerably by audience. For the broadest and oldest audiences, TV CPTs have lagged behind the Consumer Price Index (CPI) going back to 2017, meaning that pound-for-pound TV is cheaper now than it was five years ago. For younger audiences, the opposite is true, with TV inflation consistently outpacing CPI and becoming increasingly hard to reach cost-effectively.

Despite the above, we know that when it comes to effective storytelling, there are few better mediums... regardless of who the target audience is. Q4 is full of opportunity in this respect, with programming such as I’m a Celeb, The Great British Bake Off and the World Cup all expecting to deliver significant reach across all audiences.

Streaming TV

For those looking for a more addressable audience solution (or indeed a cheaper way to access harder-to-reach linear audiences), BVOD offers a reliable answer. Viewing continues to tick upwards while prices across the board remain broadly flat. What’s more, every month that goes by typically sees the broadcasters add new targeting capabilities or data integrations.

The introduction of Netflix’s ad-supported tier – along with YouTube’s ever-growing CTV inventory pool – is likely to make the CTV space more competitive than ever as we approach the end of the year. That is great news for advertisers, as smart planning and trading in the CTV space can mitigate price rises elsewhere.

Online and social

Social media is still feeling the impact of changes to third-party cookies. Following Apple’s app tracking transparency initiative (ATT), advertisers have been pulling back on spend because of degraded performance over time. Although the impact hasn’t been as bad as Warc’s original forecast, deciding how to plan budgets at the moment is proving challenging.

But it’s not all doom and gloom. A reduction in advertiser competition – or demand, in other words – has seen CPMs fall, creating opportunities for advertisers to deliver better value across both brand and performance campaigns.

Still, the beauty of digital platforms is their capacity for agility. With both advertiser and consumer demand in Q4 hard to second-guess, advertisers would be well advised to make the most of this flexibility, allocating budget fluidly as the market evolves.

Conclusion

With advertiser demand so closely linked to today’s socio-economic environment, it’s almost impossible to second-guess media inflation in Q4. To that end, the reductive commentary surrounding inflation in media often ignores the nuances between audiences, channels and platforms. Not every impact or impression is more expensive than it used to be, and for those that are, savvy media planners and traders should know how best to mitigate.

Agile and agnostic planning is therefore key (as ever), however optimizing away from inflation should not be considered a viable media strategy. If we consider advertising to be an investment, then we should be prepared to accept – to some extent at least – a variation in returns from time to time. Almost all of the independently-published benchmarks for ROI in media contain headroom, meaning that many forms of advertising have a long way to go until they become unprofitable.

The best advice for advertisers in the face of inflation is to figure out, via econometric modeling or structured testing, the true value of their own advertising. Without this context, cost inflation is only half of the story.

On November 2 and 3 watch The Drum Media Summit 2022 free for further insights.