The continual rollout of multitiered streaming services has made it easier than ever for customers to sidestep marketing messages, as they pay a premium to enjoy programming without any interruptions for ads. This poses a challenge for marketers, who remain keen as ever to reach higher-income households: the customers with the most disposable income are those in the best financial position to skip ads in their entirety.
This conundrum is priming the marketing landscape for a transformation, as advertisers reconsider how best to use their ad spend. As noted by Eric Schmitt, analyst and research director at Gartner, “The people advertisers most want to target are hiding from the advertisers.”
Audiences Are ‘Buying Out’ of Advertising
Brands that target the exceptionally rich aren’t traditionally big spenders when it comes to TV ads—but the same can’t be said of those that position their products as aspirational purchases. And yet advertisers and media buyers are only too aware that ads aren’t welcome at the best of times, regardless of their content or the audience. Customers will do whatever’s within their means to access the content they want without having to sit through ad breaks.
What’s more, rich customers are more likely to own iPhones, which come with a more sizeable raft of digital privacy restrictions as standard than other mobile devices. And while how we even define a ‘high-income’ household in the first place is somewhat arbitrary, in the US at least it’s often demarcated as one whose annual income exceeds $125,000.
When we zoom out for a global perspective while retaining that categorisation, 2020 data from the Global Web Index found that 70% of high-income customers opt for a product’s premium version if it meant they got to skip ads. How much further will this trend have developed in the three years since then? Moreover, the GWI also found that 32% of this group use ad blockers, more than any other income bracket. In essence, the same households who advertisers most want to sell to are ‘buying out’ of advertising entirely.
Advertisers Are Trying to Stay One Step Ahead
That’s not the end of the story for marketers seeking to sell to higher-income households, though—far from it. For example, some are renewing their interest in direct mail, as well as focusing on more content online to pull in prospects. In other words, they’re shifting their attention to places that customers can’t ‘opt out’ of as easily. And when it comes to streaming video, a movement toward customers opting out of ads may well lead to more intensive product placement in shows, especially those that centre around apparently aspirational lifestyles.
This Is Only the Start of a Fundamental Change to Advertising
Going forward, this shift will likely spell even greater challenges for traditionally ad-supported media channels, including TV, as marketers look elsewhere to reach higher-income audiences or else spend more resources advertising to previous customers. Why? Because if the customers with the most disposable income become ever harder to reach through the media channels of advertising, ad spend will decrease, slowly but surely.
There are exceptions, of course. Take live sports, which can still deliver vast audiences while presenting opportunities for high-value sponsorships and athlete-led brand endorsements. It’s notable too that live sport often lacks an option for skipping ads entirely, even on streaming services. But we’ll probably see a continued dispersion of media spend toward other avenues for reaching higher-income audiences, including through organic social posts, as well as new formats like the nascent metaverse.
How this remarkable shift affects the nature of advertising themselves remains yet to be seen. But whatever happens, as the CEO and cofounder of Pixated, a performance marketing and web design agency, there’s one thing I can say for sure that marketers must bear in mind: the onus isn’t on customers to watch or listen to ads. It’s on advertisers to figure out how to make their ads worth paying attention to in the first place.