Coca-Cola loses faith in TV commercials

Getting viewers' attention remains a challenge for the company, which spends billions every year on advertising.

By Jonathan Berr Mar 26, 2012 11:58AM
Image: Businessman watching television (© Image Source/Corbis)Coca-Cola's (KO) first commercial was produced in conjunction with a television special featuring ventriloquist Edgar Bergen and his dummy Charlie McCarthy. It ran on Thanksgiving Day 1950. 

These days, the No. 1 soda maker is much less enthusiastic about 30-second spots.

"With ad-skipping rampant, the company has lost faith in the effectiveness of traditional ads in comedies and dramas, save for the Super Bowl, 'American Idol' and other programming that consumers watch live and talk about the next day around the Coke machine," according to MediaPost.

Coca-Cola isn't abandoning the boob tube entirely. It is planning a major Olympics push this summer, but the company believes that a traditional 30-second spot can no longer stand alone. The company is a huge advertiser, spending $11 billion globally over the past two years, so its views about TV should give investors some pause.

The old joke about companies not knowing which half of their advertising budget is wasted is ancient history in the Internet age. Companies can no longer afford to waste a nickel selling their products and services. The Internet enables advertisers to target specific demographics far more accurately than they could with television, which is why spending on the Web is increasing at the expense of traditional media. 

For Coca-Cola, as with most major brands, advertising is all about targeting demographic groups -- and the younger, the better. Advertisers believe, perhaps wrongly, that older consumers are more set in their ways and less apt to switch brands. Unfortunately for media companies, such as ABC parent Walt Disney (DIS), CBS (CBS) or Comcast Corp.  (CMCSA), the audience for broadcast television tends to skew older. Viewers also are watching less cable TV, whose audiences are often younger, which is bad news for Viacom's (VIA.B) Nickelodeon, Time Warner's (TWX) TBS and TNT, and News Corp (NWS), whose cable holdings include FX.

The Wall Street Journal on Monday noted that the average audience for 11 of the 15 most-watched cable channels has fallen from a year earlier.

The Atlanta, Ga., beverage company is hardly alone. Kantar Media notes that the top 10 TV advertisers spent $10.1 billion in 2011, down 0.8% from 2010. Four of the top 10 -- Procter & Gamble (PG), AT&T (T), General Motors (GM) and Verizon Communications (VZ) -- spent less on the medium last year than they did in 2010. Procter & Gamble, the No. 1 advertiser, raised spending on magazines at the expense of television, still the foundation of its marketing spending. How long that view will hold remains to be seen.
 
Rich Greenfield
 of BTIG has argued that 2012 will be the first year in history that traditional TV consumption will decline. That is forcing networks to get creative to find ways to squeeze more money out of advertisers. For instance, it's no coincidence that the judges on "American Idol" drink out of glasses emblazoned with a Coke logo and that the stars of "Pawn Stars" chow down on Subway sandwiches. Though 30-second commercials can be annoying, at least people are able to tell the difference between content and commercial.

Jonathan Berr is long Coca-Cola.
85Comments
Apr 10, 2012 1:00PM
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OKAY EVERYONE...

let's settle this once and for all.

•  If you believe that Coke is better than Pepsi, click on the THUMBS UP.

•  If you instead believe that Pepsi is better than Coke, click on the THUMBS DOWN.

 

Let the voting determine the winner!

 

Wink By the way...for the record, my vote is for Coke!

Mar 26, 2012 12:54PM
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About time somebody wakes to realize that TV commercials are written by dummies for dummies, and nobody sits through this junk any more!  Corporate executives waste tremendous sums of money - and these people are supposed to be bright!
Mar 26, 2012 5:05PM
Mar 26, 2012 5:11PM
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I guess we forget to remind the TV and Radio industry who did this without letting anyone know they have increased the Adds on regular TV to approx. 5 minutes of 30 second commercials. That's enough time to get up pop some popcorn change diapers or just go outside and get some fresh air. Sorry you brought it on yourself by being so greedy!   I love my DVR.
Apr 10, 2012 11:00AM
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I almost stopped watching TV because it is more commercials than programming(San Diego, CA) It seems that half the time is devoted to commercials. I am also planning to cancel cable services.
Apr 10, 2012 11:19AM
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The whole reason commercials have become ineffective is due to the major networks increasing the amount of commercials in a 30 minute progam.  As consumers, we know that we have enough time to do other things during the commercials ... and why not?  I know I've got 3-5 minutes to do other things.  If we knew that there would be only 30 seconds of commercials then we would be more likely to sit through it in order to not miss the program.  You need only compare a sporting event to a sitcom to see this.

 

 

Mar 26, 2012 4:45PM
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TV commercials hardly get watched anymore with the advent of the DVR. Most people record there favorites then fast forward through the comemercials, just ask my 19 yr old daughter.

Mar 26, 2012 5:37PM
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Commercials are a waste of time on the internet, TV, and radio.
Mar 26, 2012 2:43PM
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In so many of the commercials the effort to be cute or original...cutting edge, whatever.... makes no sense in that I can hardly tell what the product being advertised is.... The message is lost!!!!  I never remember them and the advertising effect is nil. 
Apr 10, 2012 12:09PM
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I think it is very simple. Take that $11 billion and cut the cost of all coke products accordingly. The best advertising they could have would be a sign on the coke rack at every sales venue that read: 2 liter COKE products:  $1.00.

 

In Puerto Rico, (an island some 1,000 miles from the U.S. where everything must be shipped in), 2 liter bottles of coke sell for $1.00 (the last few times I was there). The culture is one of juice drinkers, not cola drinkers. If Coke can manufacture coke on the mainland, ship it 1000 miles and still sell it for $1.00, they could do it here, too.

 

I'm always amazed at the "cola wars". One week Coke is on sale and the next week it is Pepsi. Each always the same price and the same sale price. It seems that more than just a little collusion is going on.

Mar 26, 2012 2:00PM
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if the commercials were as creative as during the Super Bowl, people would watch. Most commercials are so dumb or you do not know what they are advertising until the end of the commercial (especially car ads)makes you thank God everyday for the remote control.
Mar 26, 2012 10:19PM
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Time is money for consumers as well as advertisers. I can watch a one hour program in 30 minutes. I tape everything and come back to it later the same day it was broadcast. So I have to watch programs an hour later-so what?
Apr 10, 2012 12:57PM
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Most people are just commercialed out, over 20 minutes of commercials in an hour show.

I dropped cable because I was so fed up with paying for commericals and decided streaming was better.  Costs less and is just as good.

Apr 10, 2012 11:38AM
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At commercial time, that is the time to surf and see what else in on. Most commercials are just

boring anyway.

Apr 10, 2012 10:53AM
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If Coke is so worried about their profits falling, maybe they better take a look at their prices.  In most area's across the nation Coke is one of the more expensive brands to purchase.  Most grocery stores consider it a sale when they have coke at $1.60 or so for a 2 ltr.  Alg price I have seen is almost $2.00 a 2 ltr.  Prices that a little over a year ago were considered 'high' by convince stores.  Yet other major companies keep their prices at a decent level $1.10 or under.  The vendors that 'deliver' coke products get a cut of the daily sales they make, so they jack the prices, and the stores have to jack it up to make their profit share....but the bottom line is that coke has gotten so greedy (and the mentality has run rampant from the top of the company, down to the people loading the trucks) that they are pricing themselves out of business.....

Its their own fault.....

Mar 26, 2012 1:02PM
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I guess the dumbing down of America on TV has finally reached an advertiser like Coke. To bad. They had some kicking commercials that were fun to watch in the past.
Mar 26, 2012 4:44PM
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Wonder if the giant companies that advertise way too much have ever thought to think that maybe, "I am tired of seeing those commercials and it is those products that I will remember NOT to purchase!"
I am one that believes that too much can in fact be too much!
Apr 10, 2012 2:04PM
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It is my belief that there are so many commercials in between a tv show that most of us just record the shows so that we can skip the commericals and get back to the show....this is why advertising on TV  is no longer that effective....
Apr 10, 2012 11:33AM
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Simple but you college morons running the companies would never go for it cause it means cutting your bonuses.  Bring back the old flavor of coke and quit all the spinoffs.  Go to less expensive advertising , cut prices to reflect that, and stop multi million dollar bonuses to the jerks who dont do nothing anyway but act like they really run a company.  Profits go up, investors get dividends, customers happy and everyone lives.  But u guys will run the company into the ground with your new fangled ways.
Apr 10, 2012 11:31AM
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Let me put it another way...

 

... Do any of your remember the first commercial Cindy Crawford did for Pepsi? These two boys were hanging on a post fence with their eyes open wide and their mouths agage. The camera pans to Cindy Crawford dressed in Daisy Dukes just walking in slow motion. Yeah... just like me your eyes focused on that image - and what an image it was. Whewee!

 

  My jaw dropped too.

 

  Then the two boys in unison uttered an expressive, "WOW," which was exactly what I was thinking - but apparently for a different reason.

 

  Yeah, I watched that commercial a half dozen times before I realized it was for Pepsi. (a "new can?" nothing wrong with her old one, I mean....)

 

  And that ad... I'm still a Coke drinker.

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