A Major New Study Reveals Audio Is A Significant ROI Driver
Profit Ability 2: The New Business Case for Advertising, a significant new study on marketing effectiveness from measurement firms Gain Theory and Ebiquity, along with media agencies EssenceMediacom, Mindshare, and Wavemaker UK, was recently released. The study reveals how advertising drives profit over time.
How the study was conducted
The original study was conducted in 2018 and was groundbreaking in proving the business benefits of advertising. Profit Ability 2: The New Business Case for Advertising was a massive undertaking that involved:
- $2.2 billion in media spend analyzed (2021-2023)
- 142 brands
- 14 sectors
- 10 media channels
- 53 brands matched pre- and post-COVID
Profit Ability 2: The New Business Case for Advertising studies examines the short- and long-term payback of advertising to business profit. All of the analysis in the new study was post-pandemic, examining advertising business effects from 2021 to 2023.
The study uses marketing mix modelling (MMM) to link advertising spend to incremental profit. Marketing mix modeling is the gold standard for understanding media effectiveness. It’s a statistical modelling approach that isolates the contribution of advertising from other factors that drive a business (pricing, distribution, seasonality, etc.).
Of ten media, audio ROI ranks second in short-term ROI and third in overall ROI
ROI determines the profit payback from a dollar of advertising.
According to Profit Ability 2: The New Business Case for Advertising, a dollar invested in audio (AM/FM radio, podcasts, or streaming), will generate $3.12 of profit within one to thirteen weeks. Overall, a dollar invested in audio will return a total of $6.29 of profit from over the entire two-year period (one week to two years).
The study finds audio has the second highest short-term return on advertising spend (within one to thirteen weeks). Audio ranks third in overall return on advertising spend (week one to two years).
Audio punches above its weight in driving profit, ranking third in profit generation and beating all digital platforms
Profit Ability 2: The New Business Case for Advertising reveals audio generates 12% more profit than its share of the media budget.
Overall, AM/FM radio ranks third of ten media in this ratio of share of profit generated compared to the share of media investment. Audio beats seven other media including all digital platforms.
Audio profit payoff occurs equally in the short term and the long term
Performance tactics like generic pay per click or online display mostly pay off in the short term (one week to thirteen weeks). Media platforms like linear TV, broadcast video on demand, print, and out of home see the majority of their payoff in the long term (weeks 14 to year two).
Audio is very well balanced in the time horizon of profit payout. Half occurs within one to thirteen weeks and the remaining half pays off from weeks fourteen to year two.