58% of Advertising Profitability Occurs After the First Three Months-New Study
Advertising generally has a short-term profit ROI of £1.87, but this profit increases to £4.11 when sustained effects are measured, according to a new study by Thinkbox.
Named Profit Ability 2: The new business case for advertising, the research is an update on a 2018 examination of advertising’s business performance. The study – analysing £1.8bn of media investment in the UK across 10 media, 141 brands, and 14 categories – was carried out with Ebiquity, EssenceMediacom, Gain Theory, Mindshare, and Wavemaker UK.
The report looks at the profit generated by ads over different time periods:
- Within a week (‘immediate payback’)
- Up to week 13 (‘short-term payback’)
- From week 14 through to 24 months (‘sustained payback’)
- And the overall period across two years (‘full payback’)
It concludes that immediate payback is not exclusive to performance channels such as generic PPC search (30.5%) and paid social (15.1%). Audio (8.6%) and broadcast video on-demand, or BVOD, (7.3%) also perform well in terms of ad-generated profit within a week of investment.
More than half (54.7%) of full ad-generated profit comes from TV, with an average full profit ROI reaching £5.61, while 43.6% of ad investment in the industry went to the medium between 2021-2023. In contrast, online video (mostly YouTube) returns £3.86, accounting for 3.4% of full ad-generated profit. However, when it comes to absolute full payback ROI, print comes top, with a high ROI at £6.36.
Print, OOH and cinema are the most consistently-performing channels across each time period, with ad-generated profits averaging 4.8%, 3.1%, and 0.3% respectively.
At a category level, the automotive sector achieved a full profit ROI of £4.65, with financial services claiming only half (£1.95). Factors including product values, operating margins and the relative strength of advertising on sales all have an impact on profitability.
Credit: WARC