Three rules to optimise advertising spend in 2025

The advertising landscape has undergone seismic change in recent years.

From the digitisation of media to the dramatic growth of social media, from expectations of seamless connectivity between channels to the far greater availability of data and analytics to gauge performance, advertising has transformed.

At the same time, brand-new consumer behaviours have emerged triggered by a combination of the pandemic and an ongoing cost-of-living crisis.

For those tasked with managing advertising budgets, it’s a lot to grapple with. And this is compounded by the fact that their own financial pressures have made it more important than ever to demonstrate a clear ROI for each penny spent.

But despite all this upheaval, the new Profit Ability 2 report by Ebiquity, EssenceMediacom, Gain Theory, Mindshare and Wavemaker, commissioned by Thinkbox, proves that the business case for advertising remains rock solid.

On average, every pound invested in advertising yields £1.87 in short-term profit, the research shows, a figure that rises to £4.11 when its longer-term brand benefits are taken into account.

So, how can brands best leverage this potential to drive both short- and long-term growth? How can they make evidence-based decisions around their media mix? And what misconceptions do they need to ditch in order to master advertising in 2025 and reap its rewards?

Rethink ROI

The Profit Ability 2 findings demonstrate that, though all advertising channels deliver profit ROI, this varies considerably by channel – and not always in the ways that brands might expect.

Established media continue to deliver. Linear TV might have seen some decline in spend post-Covid, as brands have redistributed budgets, but it continues to drive the highest volume of short-term returns and the highest total volume of profit of all channels, with a full profit ROI of £5.94. That’s compared to a much lower £3.86 for online video, and £3.52 for generic PPC.

“Linear TV generates more sales than anything else does by orders of magnitude,” says Dominic Charles, managing director of audience intelligence and marketing science at Wavemaker UK.

Print, too, delivered surprisingly strong results given its steep volume declines. Though it now represents only a fraction (3.3%) of total advertising spend, it achieved a full profit ROI of £6.36 – the highest of all channels.

By contrast, some digital channels around which there’s been significant buzz in the last few years fell short, points out Charles. Paid social, in particular, now accounts for 13.2% of budgets but achieved a full profit ROI half the size of the leading channels, at £3.20. Online display was even worse at £2.34.

“That performance isn’t as strong as you’d expect given the volume of attention in the industry those channels generate,” he adds. “It’s evidence that we’ve potentially not found the sweet spot for spend in those channels, particularly on social.”

Short-termism short-changes brands

In the current high-stakes economic climate it can understandably be tempting for brands to pursue immediate results. However, that short-term approach can leave a huge amount of value on the table.

The Profit Ability 2 research shows that short-term effects, such as sales uplifts, constitute only 42% of total advertising payback. The majority comes from longer-term, sustained benefits that kick in three months after the initial advertising investment and include positive improvements in awareness, perception and brand engagement.

This dynamic – between short- and long-term impact – is even more stark when broken down by sector.

Take financial services, where the short-term media falls just short of break-even with a £0.94 ROI. Marketers in this sector need to factor in the sustained impact of their media mix to achieve profitability. This reflects the structure of their revenue stream, with the majority of profit arising from an existing loyal customer base cultivated over many years and illustrates the need for brands in this space to gauge impact over a longer time period, taking into account a more holistic set of metrics.

Break out of siloes

In addition to a short-term mindset, “what really hurts brands is arbitrarily bucketing certain channels” into rigid siloes on what they can and can’t deliver, says Charles.

In particular, there’s a tendency to assume (mistakenly) that paid social and PPC are only effective at ‘performance’– ie encouraging people to interact with brands in the short term – and that established media like TV and OOH are less effective in a shorter timeframe and should be reserved for long-term brand-building.

This unhelpful distinction between brand and performance has only been amplified by the type of data that digital platforms provide, which naturally lends itself to a cause-and-effect style execution, says Charles. In fact, PA2 shows that linear TV is the second strongest performer for immediate payback followed by Paid Social, Audio and BVOD.

“But that simply isn’t borne out by the data,” he adds. Instead, the data shows that all channels can be used to drive improvement in both performance and brand when coupled with the right messaging and the right execution.

It’s why a far more effective framing for decisions around a brand’s media mix is through the lens of “scale, efficiency and time”, he advises. Brands need to weigh up the value of an advertising channel by an understanding of its volume of profit (scale), the ratio between cost and payback (efficiency) and the length of that payback period (time).

A strong business case

Though much in the world has changed since the original 2017 Profit Ability study, it’s clear from this ground-breaking update that the business case for advertising remains compelling.

How to leverage its benefits, though, in a multichannel, digitised landscape, has got more complex, requiring brands to carefully challenge their own assumptions about which channels can deliver which payoff, in what timeframe and with what profit ROI.

Download the full Profit Ability 2 report here.