It’s the $64,000 question. To what extent is Internet advertising displacing television advertising? The press has been speculating for years now about the Internet’s impact on television. And convergence is a big issue. Today, I’ll shed some light on the interplay between the two.
Television still dominates the American household. Americans watch about 535 million hours of television per day, compared to about 85 million aggregate daily hours of home Internet use. This is a huge gap, but not as big as the advertising revenue gap.
Television remains the 800-pound gorilla of US advertising, consuming about 29 percent of the country’s total ad budget, while online advertising comprises only 1 percent.
Clearly, television advertising is bringing in a lot more bucks per hour of viewing. In 1999, this makes sense, as television advertising has the audio and video and download speed that make for richer, more compelling advertising.
As The Strategis Group’s Advertising on the Internet: 1999 study showed, online advertisers are predominately pursuing click-and-buy e-commerce, not building offline brands. The study showed, in fact, that 13 of the Fortune 25 companies do not have a significant online ad presence.
I’m not saying that television will retain this kind of dominance forever. I see four major factors affecting this imbalance. First, while the growth in Internet usage has been phenomenal, only about 41 percent of US adults use the Internet in the home, so there is great room for further growth.
Second, high-speed access in the home is minimal today, but The Strategis Group sees high-speed penetration of about 12 million households as early as 2003.
Third, as targeting capabilities improve, so will online ad revenues. Television is inherently an inefficient mechanism for delivering ads, as targeting is difficult and one-to-one targeting is impossible. Not so with the Internet.
The fourth factor is the demographics. If you look closely at the average hours of viewing for educated persons and upper income persons – people with disproportionate spending capacity – you’ll see that the Internet is becoming a key path to reaching these lucrative audiences. The average American watches about 4.3 hours of television per day, but the average Internet user with a college degree only watches about 2.2 hours per day, while using the Internet for about one hour per day at home, plus time spent using the Internet at work.
Bottom line: If you want to reach an educated audience, the Internet should be part of your promotional arsenal.
Displacement Of Television
About 42 percent of Internet users watch less television due to Internet use, based on mid-1999 data from The Strategis Group. This number has not moved much from previous surveys.
One interesting statistic, however, is that the more a person watches television, the more hours the same person uses the Internet. This seems counterintuitive, as the Internet is clearly displacing a lot of television hours. However, “heavy users” (10 hours or more of home use per week) view 2.8 hours of television per week, compared to only 2.4 hours for “light users” (less than two hours of use per week).
The explanation probably lies in personality types; some people are active and spend little time at home, while others are more inclined by personality or life conditions to spend more time entertaining themselves at home.
ZDNet Slays Buffy
For reasons of raw numbers and bandwidth, the Internet is not ready to challenge television’s crown as the king of US advertising. It is rapidly making up ground, however, and advertisers would be well-advised to carefully study the demographics and psychographics of their target audiences before choosing between television and the Internet. Your new mutual fund may get a much better response on ZDNet than on “Buffy the Vampire Slayer.”