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Episode 85

Optimizing Your Media Mix with Richard Kirk

Brands are spending 3X too much on social media according to new analysis of data from 140 advertisers. The research suggests social spend should drop from 13% to just 4% of media budgets, with the difference reallocated to more effective channels like TV.

This week, EssenceMediacom UK's Chief Strategy Officer Richard Kirk joins Elena and Angela to explore research on media effectiveness. They discuss why marketers overvalue digital channels, the resurgence of TV advertising, and how streaming platforms' shift to ad-supported models is changing the media landscape. Plus, hear about the UK's robust marketing effectiveness culture and what US marketers can learn from it.

Topics Covered

• [01:00] New analysis reveals major media mix imbalances

• [06:00] Why 60% of advertising impact comes after three months

• [09:00] How the Media Mix Navigator tool optimizes spend

• [13:00] UK's marketing effectiveness culture and research

• [17:00] Streaming platforms' return to ad-supported models

• [21:00] The resurgence of TV-style advertising formats

Resources:

2024 Media Leader Article

Profit Ability 2 Report

Media Mix Navigator

Richard Kirk’s LinkedIn

Today's Hosts

Elena Jasper

VP Marketing

Angela Voss

CEO

Richard Kirk

EssenceMediacom UK's Chief Strategy Officer

Transcript

Elena: Hello and welcome to the Marketing Architects, a research-first podcast dedicated to answering your toughest marketing questions.

I'm Elena Jasper. I'm joined by my cohost, Angela Voss. And today we're joined by Rich Kirk. Rich is the chief strategy officer at EssenceMediacom UK. He was recently named Campaign Media Planner of the Year and is an expert in advertising, communications, and media planning. He has extensive SEO experience, led brand strategy at Zenith UK, and returned later as their chief strategy officer.

He was also a brand strategist at Amazon. Like us, he's passionate about research and effectiveness, and he played a key role in one of our favorite pieces of research from Thinkbox, which is called Profit Ability 2, which we've actually covered on the show before. So we're so excited to chat with you. Welcome Rich.

Richard: Hi guys, great to be here.

Angela: So happy to have you. Thanks for joining us.

Elena: Yeah. Rich, you were someone that you reached out about this, and we get a lot of people kind of requesting to be on the show, but we've got such a niche marketing topic that it's not always a fit, but yours came through and I thought, "Oh my gosh, he worked on this study. He is perfect to have on the show."

Richard: I, first of all, I think I'd give a huge shout out to all the analysts, led by a lady called Olga Zaitseva at EssenceMediacom UK, who put this piece of work together, after it was commissioned by Thinkbox. Where I've really come into the project is after the study was written for Thinkbox, where we talked about all things that you've covered on your podcast, the fact that there's different time horizons for payback for different channels, the fact channel payback varies depending on the category you're in. And that channel payback has also varied pre and post COVID in the UK.

After we'd done that report, Olga and I worked on trying to look at all of the spend that was in the data set and then optimize it based on all of the aggregate curves that we've got out of the data set, because it's a collection of 140 brands' econometric studies. And so we're basically, what we were wanting to ask is, are these brands following their own effectiveness numbers? I wrote a piece recently about the results of that analysis in the UK, there are some really different, when you look at the spend of the brands in the data set, and then you look at what their effectiveness data says they should be spending, there's some big deltas there. And then that's become something that's caused a fair amount of discussion in the UK.

Elena: Perfect. I'm really excited to get into it. As a reminder, we're always trying to root our opinions in data research, what drives business results.

And I think this topic will fit well within that. But before I get too deep into our interviews, I like to tee things up with an article, piece of research. And this one was very easy to choose because, as you just mentioned, you sent me this article of yours when we were chatting about having you on the show.

And it has kind of a spicy title. It's titled "Brands Could Be Spending Three Times Too Much on Social.” You read that right. And this was published by The Media Leader. In this article, you talk about a recent analysis you conducted, as you just mentioned, that shows big brands may be overspending on paid social, potentially three times more than the optimal for growth.

And you talk about this Media Mix Navigator, or MMN, and this tool uses data from the Profit Ability 2 report we mentioned earlier. It revealed that social media spend should be cut from an average of 13% of your media mix down to as low as 4%. And while social is overvalued, linear TV is undervalued and delivers better returns.

And we always love whenever someone other than Marketing Architects points out how great TV is. So thank you for that. And I don't want to get too far into the research myself. You teed it up well just now because we've got this author with us today. Rich, as I understand it, the research you did, the article you wrote, it's a follow up to this Profit Ability 2 report, which we've covered.

It was very popular, especially within kind of the marketing research circle. I personally loved it. I read it cover to cover and we covered it on the show. So could you talk a little bit more about how you got involved originally with that project? And have you been happy with the responses received not only from UK marketers, but from marketers like us?

Richard: Thinkbox did a Profit Ability 1, several years ago now. And the goal of it is to try and bring together as many econometric studies from brands as possible. And so GroupM, which is the holding company that I work for, all the agencies in GroupM that provide econometric services, anonymized and pulled together their econometric ROIs that they discovered for clients and together they built a set of aggregate econometric analyses for each of the categories where we had enough data to produce like aggregate results.

And then we were able to show in the short and long run that advertising does pay back in the UK marketplace and the paper was called "A Business Case for Advertising.” So it was sort of saying, if you're not doing econometrics right now, here's the aggregate findings from lots and lots and lots of brands that might be in a similar position to you. And Profit Ability 2 was kind of a revisit of that in 2020. I think most of the data comes from 2023. Some of it comes from 2022 and a very small amount of it comes from... The idea was to try and understand has advertising ROI by channel in the UK changed, given the weirdness of COVID. And yeah, we were able to show that on all the different time scales, different categories, advertising is paying back.

Particularly interesting was some of the findings we made about how much payback is coming from channels like linear TV still, despite what I would describe as quite a strong decline narrative that surrounds linear TV, at least in the UK.

Angela: Yeah, I think we feel that here in the U.S. as well. Just a little kind of doom and gloom sentiments around the future of linear TV, despite the fact that it's forecasted to be about where it is for several years still at this point.

And so, you know, no surprise. One of the things we loved about the report was how it challenged kind of that traditional belief system about offline media like TV and how it should be balanced with digital. What would you say was the most significant finding from Profit Ability 2, or were there other findings that stood out to you?

Richard: Ooh, there's a few good ones kicking around in there. I think one of the ones that I really like is that when you look at the full payback over a year of advertising, which, and we classed a year as the sustained effect of campaigning.

And then you break that payback down into kind of payback you get inside of a week, payback that you get inside of a quarter and payback that you get inside of a year. And look at the whole ROI, 60% or just under, I think 59% of all the ROI comes between the end of the first quarter and the end of the year.

The idea that like you could judge a campaign after a couple of months, it revealed the sort of fallacy of that because you've still got 60% of the value still coming into the business. This is 1.8 billion pounds of media spend in the UK that's been analyzed in the post-COVID period by 140 large, what I'd call national brands in the UK.

So it's the kind of insight that's generally applicable to all the kind of clients that I work with. It's one of those ones where it's a great way to push back against that sort of, "Well, the TV went live last week. So has it changed our brand yet?" questions, which I think you can sometimes get in businesses.

Angela: It feels like in some ways we turn ourselves in circles. Like it makes sense. And for those of us that know about principles like the 95-5 rule, when you hear something like 60% of the impact is going to come a quarter or longer from now, you'd go, well, that kind of makes sense.

And yet we're continually just spinning around immediacy and kind of our ability to drive these short-term results. And I mean, what do you make of that? Like, how do we get ourselves out of that?

Richard: A difficult one because for a long time now, I think some of the most powerful media owners on the planet have been providing us with instantaneous linear attribution data. And when you've got that instantaneous linear attribution data, anything that doesn't provide instantaneous linear attribution data looks kind of frustrating. And you're like, well, if I can understand it over there, why can't I understand it over here? Obviously, once you start to get into the subject, you start to realize that that instantaneous linear attribution data is actually just not really a particularly accurate answer at all.

Which is why now, all of those companies advocate for proper econometric analysis of spend and lots of experimentation and holdout testing to calibrate your econometric model, which is great. It's brilliant that everybody has sort of, I guess become more sophisticated in their view of measurement, but it is a tricky one.

And I think the 95/5 rule is something that lots of non-marketers can instinctively understand. And that helps if you use that to explain to them. I always think a brand is like a jetliner, with altitude as being kind of share of market. If you're full of passengers and fuel and you sort of try to climb a little bit, you're not going to instantaneously get to your target altitude. It's going to take a little bit of time and you're going to have to spend or accelerate all the way through that period.

Elena: I also love that role and the concept of talking about it. The article you wrote, you did this follow up to the study and you got pretty precise in some of your numbers and the amount that brands are possibly overspending on social. Can you tell us a little bit about this new data set and then what these findings mean for advertisers?

Richard: Yeah, sure. So it's the exact same data set, right? So we're using the same data set that was behind Profit Ability 2. But this was where some of the analysts led by my colleague, Olga, they went a little bit further and they said, okay, so in each category, if we take all the spend by the advertisers in those categories, and then look at the proportions of spend going into each channel. And then we run those, the same kind of spend through the econometric analysis, the aggregate econometric curves that we've built for this category. What would the optimal spend mix look like? And they produced this chart, which I'm sure we'll link to in the show notes, where you can see that the optimized spend to deliver the maximum profit to the business is significantly shifted towards linear TV.

Also, interestingly, in most categories, search also receives more cash in the optimized media mix, as does cinema and online video. And yeah, the main casualties, in terms of spend were social, which as you've already said, Elena went from about 13% average spend for large brands in the UK to 4%, and then display as well.

Elena: Yeah, that tool was fun. I was playing around with it. I'm guessing it's more optimized for the UK market, but I still found it fun.

Richard: Yeah. Yes. I didn't mention that. Yeah. So we built a tool. So there's a tool now on the Thinkbox website where you can go as a marketer and you can put in some very simple information about your business, what percentage of your sales happen online, how much revenue do you make a year and what's your marketing budget.

And it will spit out a load of analysis based on 1.8 billion pounds of spend in the UK and 140 brands. You can even narrow it down to your specific category in some instances. And it will tell you things like how much return you could expect in year one, year two, and year three from your advertising.

When you might see that payback over the course of those three years. You can play around with how much risk you'd like to take on, and you can also look at what would happen if you were to increase your budget by one, two, five, 10 million and decrease it by one, two, five, 10 million.

Elena: So it's a really useful tool. Again, I'm sure we'll link to it. The tool is fun. We'll definitely include a link in the show notes so people can go play around with that. And I think it's a nice way to take all the research and the principles and the data, and then create something so it can look more practical for people. But I want to talk a little bit about this research in general and kind of the imbalances it found.

And we can just focus on the UK market because I know that's what you have the most experience with. Do you think that brands, media planners, are they embracing this kind of research? Do you think the focus on digital, maybe on social over TV - do you think it's going to be corrected or shift anytime soon?

Richard: There's been quite a lot of discussion about it in the UK industry. I think a lot of people are keen to hear this kind of thing because they instinctively feel like effectiveness is not where it could be for their brands and that the sort of very big promises about massive performance improvement that a lot of digital platforms have talked about for several years - even though their sort of spending hasn't massively materialized.

There's been some push back and a lot of people say like, "We'd like to spend more on TV, but we need to be able to target our TV more accurately and in more sophisticated ways." And the market in the UK is coming on leaps and bounds really quickly in terms of your ability to do that, which is good.

One of my colleagues, actually, Josh Gornell, who's our head of social, he wrote a piece this week about, okay, well, maybe we need to... social, maybe that part of the plan that's sort of become a little bit repetitive, kind of always on, constantly being optimized in one direction.

Maybe like one of the best things to do as a response to this report is not sort of panic as someone who's in social, but take a step back and then think, am I really sort of thinking outside the box about how I could make my social better? Could I be doing more integration and partnerships with people who are big content creators and stuff? Or could I be partnering with major publisher brands in their social spaces instead of just buying sort of spots-based advertising across social networks. And I think that's great advice - it's a great prompt to look again at exactly what you're doing in the channel.

But there's, yeah, there's been quite a lot of positive feedback. And again, some people question, well, how can we do this better?

Angela: Rich, having you here is helpful to our mission of growing awareness and adoption of marketing effectiveness principles here in the U.S. Although I know you listen over in the UK, I appreciate you doing that. You're on the other side of the pond, where it appears there's more widespread awareness and adoption of marketing effectiveness principles in general.

I think the Profit Ability report helps to socialize the right balance in your marketing, but I would just ask more broadly, what's your experience with marketing effectiveness? Think there's a growing movement around it?

Richard: I think the UK, from an advertising point of view - advertising planning was created and grown in this market with a lot of brilliant strategic thinkers in it. In terms of effectiveness culture, the IPA, which is sort of the trade body for agencies and practitioners of advertising generally, they run this thing called Effectiveness Week every year, where we have the IPA Effectiveness Awards, which I think globally are held up as like the gold standard in terms of being able to show, yeah, this campaign genuinely delivered business results.

When you write an IPA paper, you have to go through and talk about how it can't have been other factors. And you have to show it wasn't all the factors that led to the upswing in business results - it had to be the advertising. They've just done Effectiveness Week last week, where lots and lots of people came together to talk about different topics in effectiveness.

This study was discussed. There's also Peter Field, who I'm sure you've talked about in the past on this podcast. He's got some brilliant new research about the cost of using dull media. And interestingly, that piece of research also points to an optimal investment into TV of about 55% to generate the highest number of business effects as a study of the IPA data bank.

So completely different methodology, completely different data set. And then you look at Profit Ability 2, and it's saying 55 to 65% into linear TV. So you've got two completely different studies corroborating the same point. Karen Nelson-Field's work gets a lot of airplay in the UK as well. And the work of companies like Lumen, in terms of generating large amounts of awareness around the effectiveness of looking at the best quality formats in the marketplace as opposed to simply the ones with the cheapest reach.

So, yeah, I think there's a really strong effectiveness culture in the UK and there's a really strong community of people working around it. There's lots and lots of studies coming out through the year. And we have this big moment at this time of year where we have Effectiveness Week, and I think that really acts as a focal point for that community.

Elena: Yeah, we actually just had Peter Field on the show and he was lovely and he talked about some of his research into the cost of being dull and the downsides of dull advertising. And he also talked about case studies that kind of reminds me of what you're saying. I wonder if there are like more of a focus on effectiveness case studies. I know Thinkbox publishes case studies like just having practical examples for people of effective advertising. Think that there's maybe just more of that right now in The UK?

Richard: I think it's more well-known about in the UK. So the IPA in the UK has a search engine called EASE, which is a searchable database of all its effectiveness papers. And then, if you're a WARC subscriber, you can download those papers. All the trade bodies in the UK are very, very strong on delivering case studies of great effective work and.

I think we've got like a series of agents - I mean, I'd call out System1 as a company who do a huge amount of work in London on effectiveness. As GroupM we also try to publish three or four pieces of effectiveness analysis a year. So we've just published two papers on the effectiveness of influencer campaigns and the effectiveness of partnership style advertising.

Elena: Which is again, like aggregate econometric findings about those types of campaigns. So I'm thinking about this last question - it might be a bad question because we're talking about today Profit Ability 2. It at least seems to me like it's almost like marketers are getting ahead of themselves a little bit. And they're assuming that channels like TV are declining faster than they are.

But I want to, I still want to ask you this. Are you, when you think about like what's coming in the future for marketers and media spend, are there any trends or shifts that brands should be aware of, you know, if they're looking to optimize what they're doing today?

Richard: In the UK at least, and I'll caveat this by saying like, this is my UK experiences. It's upfront season here at the moment. So we're going around and speaking to lots of media owners about their picture of the future. You know, I really feel like we're in a sort of bit of a back to the future moment.

Since interest rates rose globally, I think the pressure has come on a lot of companies to start delivering results in the short term and not be so focused on future value. I mean, interest rates rose and Facebook completely gave up the ghost on the metaverse and focused on building AI instead and what that did for the share price.

So I think that it's been great because what that's done is it's pushed companies like Amazon advertising and YouTube to look much more like... Well, how can we maximize our return? And what they've realized is, they've got all the technology in place to deliver targeted advertising, and they've got their first-party data set to deliver targeted advertising, but instead of delivering ads that are like delivering ads that are £6-£7 CPM, they've said, well, why don't we start creating ads that look a lot like tele ads, or formats that look a lot like tele formats, and charging 30 plus CPMs.

For those formats, because it's just so much more profitable. And so all of a sudden in the UK market, you know, Amazon last week was talking about how 19 million users are now on ad-supported television through Prime Video in the UK. Netflix are talking about north of 7 million in the UK and growing.

The broadcasters, so ITV, which is our main sort of commercial broadcaster in the UK, they've had a brilliant year with lots of really hip programming and their online platform is growing really, really rapidly as well.

So the fantastic thing is we're sort of after a period where a lot of television in the UK had no advertising in it, and it was very hard to reach people with these really high quality formats. We're now in a period where all of a sudden that reach has come back again.

Elena: That's really exciting.

Richard: The key question for people like me will be trying to work out exactly what all these new environments that are offering tele-style adverts are worth, so that I can advise clients.

Elena: Yeah, we've definitely experienced similar things in the U.S. That luckily for marketers, a lot of the streaming platforms, they're becoming ad-supported. People actually prefer ads if it can help them get their content for less. For a while, I mean, it wasn't that long ago that people were saying TV is just going to die completely because nothing's going to be ad-supported anymore. And it turns out that streaming is looking a bit similar to...

Richard: The explanation I can come up with for that was like we were in a period of zero interest rates. And so disruptive platforms like Netflix, they were part of a massive VC-funded global gamble on creating future value and advertising was an impediment to bringing in users when everyone else was also trying to keep its advertising to either the most non-interruptive skippable advertising possible or no adverts at all.

For me, I think the change in the economic landscape in the Western world basically forced these companies to look back at advertising as a revenue stream and happily they now all seem to be very, very convinced it's great for their business. I mean, I think that a really interesting thing is the way that Amazon advertising have changed their opinion from being like, "We don't want adverts in Prime Video because it's bad for the customer experience" to putting adverts in and finding that their churn was incredibly low.

They just didn't lose very many people at all. And so they're like, "Oh, well, I suppose over the long run, we were probably wrong about that, actually," because people instinctively understand the value exchange. Amazing TV content, there's advertising around it and it doesn't bother the vast majority of people.

So yeah, it's really, it's a big shift. It's like a huge, huge shift, and probably one of the most consequential shifts of the last maybe seven or eight years we've had in this market is this sudden resurgence of 30-second TV style advertising.

Angela: Absolutely. Back to the DeLorean. We're seeing bundling in the streaming space just the same way we did, you know, in cable. We've got live TV programming. We've got more drivers of long-term value for these publishers. So yeah, it's just, it's on repeat, a blast from the past.

Richard: Yeah. Bundling is starting to become a big thing here as well. I think one of the interesting things will be the difference in the bundles between the UK and the U.S. I can see that the way that the bundles have lined up in the States, and I'm not 100% sure that that will happen here, but, yeah, Sky, who are the main sort of pay TV provider in the UK, are starting to bundle in more and more SVOD services with their packages.

Elena: Yeah, Rob and I were breaking down how many different services we subscribe to at this point the other day, and it was actually a good exercise for me, but it was a little depressing.

Richard: I saw you, I remember you said you had to build an Excel sheet. I think the market's a little simpler for consumers in the UK. I can't imagine many people would have to go to the lengths of building an Excel sheet here, but yeah, definitely like lots and lots of different combinations are possible.

Elena: Great. Well, Rich, thank you again for joining us. It was so fun to get to talk to you and revisit this research again. Do you have any final words, anything else you want to plug? We'll make sure we include those links to the tool and to your article, but anything else before we sign off?

Richard: We've done some more research this year, which is about media signaling strength, which I think is... Can you quantify the strength of that message? Which is reasonably well out there, which I think is quite interesting. We'll be looking forward to it.

Elena: And please tell Thinkbox that we love them. It sounds like you have a relationship with Thinkbox and tell them people in the U.S. appreciate it too. They should build a U.S. Headquarters, maybe. How about that? It's an expansion.

Richard: Lindsay and Matt and the team at Thinkbox have done a brilliant job of commissioning this research and then, I think that's one thing that I would say is that it's a TV trade body commissioning research into marketing effectiveness, and it says that people are underinvested in TV. So clearly people are gonna sort of put two and two together there. But this study was genuinely - Thinkbox commissioned it and then had no role whatsoever in the compilation of data.

You can see from the data that there are some findings here that are like not the kind of thing you would expect a TV trade body to say. So overall search, online video, are channels that probably need some more budget. BVOD is not optimized upward as much as you would expect. So BVOD is Broadcaster VOD - it's very UK - it's not optimized up as much as you would expect.

So I think they've done a brilliant job in commissioning research that is genuinely for the benefit of the whole industry and not the kind of thing that's just designed to try and make TV look incredible.

Elena: Yeah. That's nice that they have a balanced view of it. And then you could trust it more when they're not just saying, 100% TV all the time.

Richard: Absolutely, yeah, 100%.

Elena: Rich. Thanks for joining. Thank you, Rich. Thanks for joining us.

Richard: Cheers, thank you for having me.