Streaming was supposed to save the ailing TV advertising sector. That is not the case.

The snack company had a simple reason for that decision. The people it wanted to reach – members of Generation Z, multicultural audiences and households with children – don’t watch enough television.

“You don’t have any show that attracts a large enough audience like ‘Friends’ or ‘Seinfeld’ used to do,” Jonathan Halvorson, Mondelez’s Global Senior Vice President of Consumer Experience, said of the current state of TV. And streamers like Netflix aren’t a perfect alternative: Their emerging advertising platforms charge too much and don’t yet reach enough people, he said.

The maker of Ritz crackers and Sour Patch Kids candies is spending about 15% of its U.S. advertising budget on TV this year, up from 42% three years ago. Halvorson said another 9% goes to streaming, meaning more than three-quarters of ad spend goes elsewhere.

To promote its new Oreo Space Dunk, Mondelez turned to social media sites like Instagram and TikTok, Halvorson said. It also relied heavily on ads that appear where people are already in a shopping mood: the websites of major retailers, including Amazon and Walmart.

‘People think streaming might be a salvation’

The move marks an important turning point. TV commercials have long been the cornerstone of modern advertising. This dominance was partly due to television’s ability to reach large and diverse audiences through advertisements that use sound, images and movement to evoke emotional responses.

This large audience no longer tunes in.

“There is no longer that one lever to pull,” says Vinny Rinaldi, head of media and analytics at Hershey in the US, referring to the role television once played in advertising. The chocolate giant said the share of advertising dollars it spends on television has fallen. from about 80% in five years to about 30%.

Brands have been preparing for the inevitable demise of television for years, but many had held out hope that the rise of ad-supported streaming TV would bridge the gap. So far that is not happening.

“A lot of people think streaming can be a savior,” says advertising analyst Brian Wieser. “But no, the whole TV is in decline.” Excluding political advertising, marketers are expected to spend more than $60 billion on traditional and digital television in the U.S. this year, up from more than $64 billion five years earlier, according to Wieser’s firm, Madison and Wall.

Despite the sharp decline in TV ad spending, Mondelez and Hershey remain much bigger proponents of TV advertising than the industry as a whole. The share of their advertising budgets that candy makers will spend on TV and streaming this year exceeds the 17% that all marketers are expected to spend in the U.S. this year, according to data from GroupM.

Today, companies need to “build reach across multiple platforms,” said Rinaldi, who cited YouTube and Meta — the parent company of Facebook and Instagram — as the best ways to reach large audiences.

Live sports is increasingly popular and expensive

The size of television reach remains a key selling point for entertainment titans as they pitch their programming plans for the upcoming TV season to advertisers — a process known as the “upfronts” that begins in earnest Monday in New York City.

Network owners will host star-studded presentations touting their new TV shows and streaming offerings, while Billie Eilish is expected to star in YouTube’s pitch to brands. Netflix will allow advertisers to participate in an interactive experience at New York’s Chelsea Piers, and newcomer Amazon.com will entertain brands at Pier 36.

One of the few things that still brings large numbers of viewers to television is live sports, which, according to Nielsen, accounted for 96 of the 100 most-watched broadcasts last year.

That, in turn, has made advertising during live sporting events more expensive. And every year, a greater amount of sports content is watched on streaming platforms instead of TV, as tech giants like Amazon and Apple gain exclusive rights to more games. Traditional TV conglomerates are preparing to launch a joint streaming platform almost entirely dedicated to sports.

“It is now clear that outside of sports advertising, there should no longer be expectations of a recovery in linear TV advertising,” analyst Michael Nathanson recently wrote in a note to investors.

Brewer Molson Coors said it spent about half of its TV advertising dollars on sports programming five years ago, up from about 80% this year, even though those ads are more expensive.

“Sports appears to be holding up and ratings are up in some cases,” said Brad Feinberg, Molson’s vice president of media and consumer engagement for North America.

The brewer said it would spend about 40% of its U.S. ad budget on traditional TV in 2023, up from 50% five years ago and about 85% in 2013. Although streaming services such as Paramount+, Peacock, Netflix and Hulu will share some of the With this TV advertising dollars, Molson Coors shifted more of that money to digital channels like Instagram and Snap, Feinberg said.

Not enough ads are allowed

The streaming landscape remains “too fragmented,” Feinberg says. Another problem: The streaming audience doesn’t tolerate as many ads as they do on traditional television.

It seems like every major streaming service has launched an ad-supported layer in the last year and a half, vastly expanding the pool of ads that can be shown on these platforms. But many of them have pledged to limit commercial disruptions to their services. Wieser estimated that commercials on some premium streaming platforms take about four minutes per hour, compared to about 14 minutes for some TV networks.

“No matter how much streaming grows, it can never make up for lost linear ad inventory as long as ad burden remains low and consumers show preferences for ad-free options,” Wieser said.

In the US, only 7.5 million Netflix subscribers (or 10% of the US customer base) paid for the ad-supported version of the platform in the first quarter, according to a joint analysis by Antenna and Wieser. The streaming platform with the largest ad reach currently is Amazon’s Prime Video, which recently set its entire user base to default to the ad-supported version.

Many brands are also turned off by the high advertising prices charged by many of the premium streaming services. According to ad buyers and advertisers, streaming ads are often three times as expensive and up to twice as expensive as ads that appear during entertainment programming on cable and broadcast TV, respectively. Streaming prices are falling due to increasing competition among ad-supported services, they said.

Further complicating matters for marketers, some streaming platforms measure viewership and ad performance differently. Plus, advertisers often can’t figure out where their ads are showing, which is a risky proposition for brands that typically want to stay away from content they deem inappropriate.

The rise of ‘retail media’

Digital players like YouTube, Meta and TikTok and retail giants like Amazon and Walmart have emerged as the main beneficiaries of streamers’ inability to capture all the advertising dollars that were leaving traditional television.

Fast food giant Taco Bell has shifted more of its TV ad dollars to advertising on social media, mainly TikTok, as users on the platform interact with ads and content online.

TV’s one-way communication, where brands talk to consumers about something, doesn’t work as well anymore, says Taylor Montgomery, Taco Bell’s chief marketing officer.

Taco Bell wants its ads to generate a two-way dialogue, with consumers taking to social media to post and comment on videos about products they like, or to join in the discussion.

Mondelez’s Halvorson said the company will spend roughly 20% of its U.S. advertising budget this year on “retail media,” a category that includes retailers’ advertising platforms. Their growing popularity is fueled by the large amount of data retailers have about their customers. shopping habits and their ability to easily measure when an ad has led to a sale.

According to GroupM, ad spending in the US retail media sector is expected to overtake traditional TV ad spending next year.

Microsoft pulled back significantly from traditional TV advertising last year, in part because the tech giant wanted to save money to fund its expansion into generative artificial intelligence and decided to lean more heavily on digital ads that offer better ad measurement, according to people familiar with the matter. matter. Microsoft declined to comment.

Halvorson said the decline in TV ad spending would happen even faster if legacy advertisers didn’t get significant discounts on their TV ads, the result of historic deals struck decades ago that give them an incentive to pursue TV to keep buying commercials.

If Mondelez were forced to buy ad time in the U.S. at current price levels, Halvorson said, “We would be out.”