Something big is happening in advertising and this is an opportunity for savvy investors.
The Great British Bake-off basks in a new golden age of TV advertising
The success of the latest series of the Great British Bake-off is also a success for Channel 4, but investors take note — something is cooking in the world of advertising and this presents an opportunity for investors.
They used to say that to be successful in retail you need three Ps — position, position and position. Then the internet happened. Success in online retail then became all about position on Google. Investors who spotted this, and backed Google/Alphabet did rather well.
But I see another change afoot — and TV advertising could surge as a result.
The Great British Bake-off
The latest series has been a success, Channel 4 has pulled it off. From an investors point of view, there is another story here too.
To explain the story, I’ll give you five pieces of news — actually, some of it is quite old news, but it’s the combination that matters.
Amazon the sponsor
- Number one: Back in March, Amazon agreed a sponsorship deal worth an estimated £5 million to sponsor the Great British Bake-off. Amazon used the deal to push its Alexa and Echo. According to the Guardian, Bake-off attracted the largest audience of 16-to 34-year-old viewers of any TV show last year.
- Back in October 2016, the then Secretary of State for Culture, Media and Sport, Karen Bradley said in Parliament that “The point Channel 4 have made to me about Bake-off is that this is the biggest programme with no adverts on it at all in the world. Now, the advertising revenue that potentially Channel 4 could receive from showing Bake-off may well pay in itself for Dispatches, for the Paralympics, for Unreported World.”
- Amazon is spending big money on advertising. In 2016, in the US, it spent around five per cent of its revenue in advertising, more than double the highest retail rival — Target, and almost 10 times more (as a percentage of turnover) than Wal Mart. Amazon grasped something. With online, physical position on the high street disappears, saving big bucks. In its stead, comes advertising.
- Number four: 2017 was a bad year for TV advertising, but one-off factors such as the fall in the pound explains this. This compares with 2016, which was a record. 2018 is expected to have seen strong recovery.
- Number five, it turns out that up to 80 per cent of TV viewers also look at a second screen while watching TV, sometimes looking up information related to the show they are watching. Search activity sees big spikes when certain programmes are on. One auto brand, for example, enjoyed a 43 per cent rise in sales by learning how to take advantage of “the connected ecosystem between TV and search.”
I don’t think anyone predicted this, but it seems the rise of mobile is complementing TV, as viewers search while watching. In the ferociously competitive world of online retail, TV advertising could pick up where spending on prime site high street positions is dropping off.
Tate & Lyle
The hint about how TV and online were interacting, creating an advertising opportunity, was there in The Great British Bake-off in 2017, too.
That year, Tate & Lyle were the sponsors, and as the final was beamed out, the company and its social media agency set aside two rooms, manned by 20 people or so, trying to capitalise on the #welovebaking hash tag. Apparently, the show “helped the brand bring a two-fold uptick in web traffic to its site from people looking for recipes and tips.”
Not that the share price has done anything special: Tate & Lyle is roughly at the same share price today as a year ago, and down on the five years ago price.
The Share Centre rates the company as a buy. It says the company is “set to benefit for consumer demand for healthier diets and manufacturers of food and drinks cutting sugar content.” So maybe it’s a case of sugar-off as we bake-off.
Bake me a cake
I would say that mobile has baked a very tasty cake for TV companies in the business of advertising.
ITV may not show The Great British Bake Off, but there will be no soggy bottom lines on its revenue, or so I reckon.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees