Value of Advertising Questioned as Adidas CEO Turns his Back on TV

This week’s indication by Adidas CEO Kasper Rorsted that the sportswear company would stop advertising on television has raised big questions about the medium’s effectiveness as a marketing channel.

CEOs overseeing more traditional advertising strategies need not be alarmed: according to Nielsen, Americans still watch almost five hours of television per day. Even so, Rorsted’s comments show they should at least be alert to the rising relevance of digital marketing channels, especially for younger audiences.

“It’s clear that the younger consumer engages with us predominately over the mobile device,” Rorsted told CNBC. “So the digital engagement is key for us. You don’t see any TV advertising anymore.”

He went on to say: “And that’s why we’re converting the way we conduct business: all of our advertising, all engagement with the consumer, is through digital media.”

The German company wants to generate €4 billion of revenue ($4.3 billion) from its only channels in three years’ time, up from around €1 billion at present, Rorsted said.

Whether his comments should be interpreted literally remains to be seen. According to iSpot.tv, Adidas has aired 108 television commercials in the past 30 days, including one featuring rapper Snoop Dog. That’s given the company a relatively low airing ranking of 1,787th and a spend ranking of 510th, the website suggests.

Television was still found to be the most valuable form of advertising compared to radio, print, online and outdoor, according to a study conducted in 2015 by analytics company MarketShare on behalf of Turner Broadcasting.

In December, Coca-Cola’s chief marketing officer Marcos de Quinto quoted figures from 2014 showing that television offered the best return on investment across media channels, making it “still very, very critical for our business”. Television advertising generated $2.13 for every dollar spent, compared with $1.26 for digital, he said.

Still, both of the aforementioned estimates are at least a few years old and viewings habits continue to change as use of mobile devices proliferates around the world. That’s why spending on digital advertising likely outdid spending on television advertising in 2016, according to eMarketer.

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