The New Business Case for Advertising

How advertising investment drives profit growth

ABOUT THIS SESSION

Advertising’s return on profit, measured

Nic Pietersma presents findings from Profit Ability 2, an econometric analysis of 141 brands representing £1.8bn in media spend across 10 channels and 14 sectors, conducted by Ebiquity, EssenceMediacom, Gain Theory, Mindshare, and Wavemaker UK.

Using marketing mix modelling, the research isolates the specific profit contribution of advertising from other business factors, measuring returns across immediate, short-term and sustained time horizons.

The central finding is that advertising generates a short-term profit return of £1.87 per pound invested on average, rising to £4.11 when sustained effects are included with 58% of advertising’s total profit contribution coming from effects beyond the first 13 weeks.

What you’ll learn

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Advertising is a profitable driver of business growth

Profit Ability 2 found that across all sectors and channels analysed, advertising generates a short-term profit return of £1.87 per pound invested on average. When accounting for sustained effects, the profit contribution from week 14 onwards, the full-effect return rises to £4.11.

The majority of advertising’s profit comes from long-term effects

Sustained effects, the profit generated from week 14 onwards, typically within two years of the advertising, account for 58% of advertising’s total profit contribution. A focus on immediate returns alone leaves the majority of advertising’s value unmeasured and under-invested.

Profitability varies significantly by sector and channel

Short-term profit returns vary considerably across sectors — from below £1 in FMCG to over £3 in large retail — with sustained effects improving returns across all categories. All channels generate profitable returns on average, though the scale and efficiency of those returns differ by category and media mix.

How to optimise advertising investment for profit

The session examines three dimensions — scale, efficiency and time — that determine how advertising should be evaluated and how media mixes should be optimised. It also addresses why the industry’s ‘brand vs performance’ framing can be unhelpful, and how to move towards a more integrated view of advertising’s profit contribution.

WATCH THE SESSION

The New Business Case for Advertising

Presented by Nic Pietersma, Ebiquity.

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THE SPEAKER

Nic Pietersma

Ebiquity

Nic Pietersma is a senior practitioner at Ebiquity, one of five agencies that contributed to the Profit Ability 2 research. Ebiquity specialises in media and marketing analytics, helping organisations understand the financial return on their advertising investment through econometric modelling and effectiveness measurement. This session presents the key findings of Profit Ability 2, including the implications for how marketers build the investment case for advertising with CFOs and boards.

Nic Pietersma

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