Is Traditional Advertising Dead?

Monday, 12th March 2018 14:04 - by Ranjeet Singh

It’s official - advertising is dead. Other than the chocolate teapot industry I can’t think of any industry that I would like to invest in less. Think about it for a second. Back in the day the media was controlled by a small number of elite companies, all well-connected and all out to serve themselves. Whether it was television, newspaper or radio there were only a small number of big players that made Russian oil oligarchs look like that they were operating in a free market economy. These big shots controlled all the chips on the table with ferocity. In fact, it was so well controlled that you couldn’t even get a seat on the table.

At best you could stand on your tip toes and peer over somebody’s shoulder to see what all the fuss was about. Now not only do you sit right at the table but the croupier knows you by your first name as she serves you your favourite drink.

What do I mean?

I mean that the power of digital advertising and social media has caused one of the biggest disruptions we have seen in the last 10 years to any industry. We hear about this word ‘disruption’ quite a lot but it’s not more visible than in the advertising industry.

No longer do you need to pay £250,000 for a 30minute television advert during the Coronation Street break but instead you could put that money into a clever funnel advertising programme through Facebook.

No longer do you need to spend silly money on a tiny piece of advertising space on a crappy newspaper nobody has even heard of and instead pump the money into building your social media following on Youtube.

You see control is what we now have ladies and gentlemen and I for one, am very happy about that. This doesn’t mean that you or your brand are going to suddenly become exposed to the masses overnight but it does mean that everybody now has a fighting chance.

I’m not talking about me personally although it affects me like it does everybody else. I’m particularly interested in the people who really had no voice or exposure at all and who were completely eliminated from the market place. I’m talking about the small barber shop down the road, or the mechanic who runs his garage at the back of his house or the amazing florist who has the best flowers in town but can’t afford to get her name even in the Yellow Pages. They were squeezed out completely and now with a website and a Facebook page suddenly they can compete, and I think that’s a beautiful thing.

And if you don’t believe me about the traditional advertising route, then at least you should believe the numbers. As they say, people can lie, numbers can’t. (I don’t lie by the way – it’s against my religion).

So, let’s see the numbers. WPP, the UK’s largest advertising company spearheaded by the very charismatic and wonderful, Martin Sorrell, (who also incidentally is the highest paid CEO of any FTSE100 company) is now expecting a sharp fall in earnings per share from around 14% per annum down to just 7%. Now these are just approximate numbers but the trend is clear – advertising revenue is going down. As a result of that we saw WPP get hammered by investors who dropped the price by nearly 20% last week. 

Of course, there will be a critical tipping point where the market will find equilibrium but I don’t think that we are anywhere close to that point just yet. We will get there in time however; it’s just not a train journey that you want to be involved in.

Now, some of you will tell me that WPP pays an attractive dividend of 5.2% to which I would reply, “So did Carillion before it went bust”. The fact is that if WPP and any other advertising company cannot compete with the likes of Facebook and Google which account for nearly half of all global marketing then you are watching the decline of something which will be irreversible in my opinion.

The fact that companies such as these pay a dividend is a dangerous distraction at best because it lulls investors into a false sense of calm. I know because I speak to clients who say that to me every day of the week “But Ranjeet, I’m a buy and hold investor, I don’t mind if the shares go down as long as I get my dividend.”

Nonsense. It’ my job to tell my clients that ignorance isn’t bliss and if a share is on a spiralling downtrend then getting 5% dividend and losing 30% on the capital, whoever you are is not smart.

Advertising is changing. Either we embrace it and change with it or we ignore it to our peril. Of course, the likes of WPP will say everything is okay, and of course other advertisers will tell you that now is the time to invest in traditional forms of advertising; that digital advertising and social media have gone too far and that direct mail is now back in vogue.

Direct mail?! Are you kidding me? Any direct mail that I get goes straight into the bin without being opened.

Elon Musk had the best idea – he just put a car into space. Talk about advertising!

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.