Is Snap about to deal the final blow to television?

ANYONE who comments on the advertising world eventually writes a “TV is dying” column. Yet so far they have all got it wrong and the beloved box in the corner marches on, as dominant as ever. Given that history, the chances are that I will be proved wrong, but let me try anyway: TV is dying.

Earlier this year the wildly popular social media firm Snap Inc floated in the US. The shares climbed 44% on the first day of trading and today the company hovers at a market capitalisation of over $25 billion

(£20 billion).

Shortly before the IPO, advertising mogul Sir Martin Sorrell gave us an insight into why the Snapchat owner is so loved by investors: WPP’s clients had spent over $90 million with Snap in 2016, three times what his company had predicted. This is still relatively tiny, of course, but remarkable for such a young company.

The very same week, we saw the other side of the story. ITV revealed its net advertising revenue had declined 3% in 2016 with most of the pain coming in the fourth quarter (down 7%), normally a crucial time for the Christmas-focused advertising business. The company blamed political and economic uncertainty but the story jarred since the stock market was hitting highs at the same time.

In the world of advertising, the third spoke on the wheel, alongside the publisher and the agency, is the brand. Here again, there is change. Kasper Rorsted, chief executive of adidas, declared last month that “you don’t see TV advertising anymore” as he pulled the plug on the sports brand’s TV spending entirely.

Rorsted predicted adidas’s revenue will hit €4 billion (£3.4 billion) by 2020 and will do so through digital engagement and “lifetime partnerships” with sportspeople rather than splurging on TV ads.

But three isolated data points do not make a trend. There are two broader drivers that put Snap in a stronger position than television: branding and demographics.

TV weathered the first internet storm remarkably well. While newspapers, direct mailers and other traditional advertising companies have seen Google and Facebook eat their lunch over the past 15 years, TV has held out because it is, first and foremost, a branding environment.

Internet 1.0, in contrast, focused on direct marketing. The consumer knows they want to buy something, it’s really a matter of deciding between competing products and where to make the purchase.

Within a context like Google’s, quite literally a question and answer service, direct advertising turned out to be a perfect fit.

TV has always been the traditional bastion of brand advertising. Less about helping a consumer scratch a well-defined itch, branding plants the seed of a purchase in the first place. Before you even know you need a new car, images of one driving through landscapes of fire and ice get you thinking; before you even know that your vacuum cleaner is inadequate, someone extolling the virtues of their new one makes you think it will improve your life.

Google has never been a great medium for brand advertising and although Facebook might be one day, the reality is that to date the company has focused on direct marketing too. Snap is changing all that.

Snap’s core product is very, very similar to TV. It’s about a time-limited experience (much like live television) and it encourages users to create immersive, engaging, entertaining content about their lives, just as television does around the lives of fictional characters or celebrities and sport.

Snap, like TV, is about passive entertainment, narrative and emotions; while Google focuses on active engagement, immediacy | and facts. Direct marketing suits the latter perfectly, but the former is the perfect Petri dish for building a brand.

The TV industry’s other big problem is its aging audience. The advertiser-coveted 18-24s still watch more TV than any other source of video.

However, those same young people watch more of every other option (YouTube, Facebook, Netflix, etc) than their older relatives and, even within the “TV” category, they are more likely to watch TV in a modified way, namely through ondemand services.

YES, this is still TV but it cannot deliver the large audiences of people watching the same thing at the same time that it used to. Advertising during the Superbowl or the final of The Great British Bake Off, when it starts on Channel 4, buys you extra value due to the so-called watercooler effect of people talking to each other after a shared experience.

And that is why we may have finally seen in Snap a competitor with the war chest, determination and focus to take the fight to television advertising. It won’t happen overnight but with a prize that big — global television advertising is worth a staggering $180 billion each year — expect a good fight. Now if only I could sell an ad slot on that show.

Suranga Chandratillake is a partner at Balderton Capital and founded blinkx, the video search engine