Nerd Alert: Digital vs. Traditional Advertising

Summary

Podcast Summary: The Marketing Architects – "Nerd Alert: Digital vs. Traditional Advertising"

Episode Overview In the January 30, 2025 episode of The Marketing Architects, titled "Nerd Alert: Digital vs. Traditional Advertising," hosts Alina Jasper and Rob Demars delve into the comparative effectiveness of digital and traditional advertising channels. Anchored by Scarlet Xiaotong Song’s study, Digital versus Traditional Advertising and the Recognition of Brand Intangible Assets, the discussion explores how different advertising strategies influence brand recognition and valuation, particularly in the context of mergers and acquisitions (M&A).

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1. Introduction to the Episode

Alina Jasper opens the episode by introducing the core topic—a deep dive into academic marketing research to unravel the complexities of advertising's role in brand valuation. She sets the stage by presenting the research focus: examining how traditional media, online display, and paid search advertising affect the recognition and financial valuation of brand intangible assets during M&As.

Notable Quote:

Alina Jasper [00:05]: “Welcome to the Marketing Architects, a research first podcast dedicated to answering your toughest marketing questions.”

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2. Ranking Advertising Channels: Initial Predictions

Alina engages Rob Demars in predicting which advertising channels—traditional media, online display, or paid search—are most effective in driving brand recognition and value. Rob confidently ranks them as follows:

1. Traditional Media
2. Online Display
3. Paid Search

Rob's Perspective:

Rob Demars [01:21]: “I'm gonna have to go with the good old fashioned traditional media when it comes to driving brand value and recognition.”

Alina concurs with Rob's assessment, expressing her surprise at the study’s findings that traditional media and online display advertising were closely tied in their effectiveness.

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3. Mergers and Acquisitions: A Predictive Game

To illustrate the study's implications, Alina introduces a game where Rob guesses which of three major acquisitions had the highest brand transaction value:

• Microsoft’s acquisition of Activision Blizzard
• Amazon’s acquisition of Whole Foods
• Disney’s acquisition of 21st Century Fox

Rob ranks them as:

1. Microsoft acquiring Activision Blizzard
2. Disney acquiring 21st Century Fox
3. Amazon acquiring Whole Foods

Rob's Reasoning:

Rob Demars [03:22]: “Microsoft’s acquisition of Activision, because titles like Call of Duty fall underneath that and it’s just such massive value there.”

Alina reveals the actual ranking, highlighting Disney's acquisition of Fox as the highest at $71.3 billion, closely followed by Microsoft's Activision deal at $68.7 billion, with Amazon's Whole Foods trailing significantly.

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4. Deep Dive into the Study

Study Overview: Scarlet Xiaotong Song’s research utilizes a proprietary Kantar data set encompassing advertising spend from 2010 to 2019 across over 2,500 companies. The study analyzes how spending in traditional ads (TV, radio), online display (banners, video), and paid search (Google campaigns) affects brand asset recognition and valuation in 287 completed mergers involving publicly traded companies.

Key Research Goals:

• Determine the type of advertising most strongly associated with brand recognition as a separate asset.
• Assess how advertising strategies influence the financial valuation of brands during M&As.

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5. Study Findings: Advertising Impact on Brand Valuation

The study unveils critical insights into the long-term value of different advertising channels:

• Paid Search Advertising:

  • Strengths: Drives immediate sales, highly targeted, effective deep funnel strategy.
  • Limitations: Short-lived impact, less effective in building long-term brand equity.

  Alina's Explanation:

  Alina Jasper [03:58]: “Paid search, for example, is great for driving immediate sales... but it's less likely to build that long term brand equity.”

• Traditional and Online Display Advertising:

  • Strengths: Casts a wide net, builds brand awareness and positive associations over time, embeds the brand into consumer memory.
  • Limitations: Less personalized, harder to measure short-term impact.

  Rob's Insight:

  Rob Demars [08:11]: “I'm surprised... display ads' ability to drive brand.”

Key Revelation: Brands investing heavily in traditional and online display advertising were more likely to have their brands recognized as standalone assets and received higher financial valuations during M&As compared to those focusing on paid search.

Notable Quote:

Alina Jasper [05:02]: “Traditional online display, it didn't just help build brand awareness, it literally increased the financial value of the brand in the eyes of investors and accountants.”

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6. Hosts' Reflections and Analysis

Rob Demars: Expresses surprise at online display advertising’s parity with traditional media in building brand value, traditionally seen as a more upper-funnel strategy compared to paid search’s lower-funnel focus.

Alina Jasper: Offers theories to explain the findings:

• Subconscious Brand Associations: Display ads may effectively create and reinforce brand memory through visual consistency.
• Comprehensive Advertising Strategies: Brands investing in both traditional and display advertising likely have a robust overall advertising strategy, amplifying brand strength.

Discussion on Retargeting: Rob suggests that display ads' retargeting capabilities—following consumers across platforms—may foster stronger brand relationships and recognition.

Alina's Counterpoint: Clarifies that while display ads perform well, they do not rival the brand-building power of traditional TV ads. Instead, their effectiveness lies in complementing a comprehensive advertising approach.

Notable Exchange:

Rob Demars [10:08]: “Could it also be the power of retargeting and just their ability for display advertising to follow you around and that just builds that relationship as well?”

Alina Jasper [10:17]: “Display, it is a way to be more personalized so, like, you can be more targeted with who you're getting in front of.”

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7. Implications for Marketing Strategy

Balanced Advertising Investment: The study underscores the importance of a balanced advertising strategy that incorporates both performance-driven channels (like paid search) and brand-building channels (traditional and display advertising).

Long-Term Brand Equity: Investments in traditional and online display ads contribute to sustained brand equity, which not only enhances market presence but also increases financial valuation during strategic corporate events like mergers and acquisitions.

Causal Considerations: Alina prompts listeners to consider whether high advertising spend leads to higher acquisition chances or if companies poised for acquisition are the ones investing heavily in advertising.

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8. Conclusion

The episode reinforces that while digital advertising channels like paid search are essential for driving immediate results, traditional and online display advertising play a crucial role in building enduring brand value. For marketers aiming to enhance their brand's financial standing and recognition, especially in the sphere of mergers and acquisitions, a strategic investment in both traditional and digital brand-building advertising channels is imperative.

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Final Thoughts: The Marketing Architects episode "Nerd Alert: Digital vs. Traditional Advertising" provides actionable insights backed by empirical research, emphasizing the long-term benefits of traditional and online display advertising in augmenting brand value and recognition. For marketers and business leaders, balancing immediate performance metrics with strategic brand-building investments is key to fostering sustainable growth and financial robustness.

Transcript

[Rob Demars]

Nerd Alert. Learning is important, right?

[Alina Jasper]

Yes, exactly. What a bunch of nerds.

[Rob Demars]

Nerd alert.

[Alina Jasper]

Right? Marketing Architects. Hello and welcome to the Marketing Architects, a research first podcast dedicated to answering your toughest marketing questions. I'm Alina Jasper. I run the marketing team here at Marketing Architects. And I'm joined by my co host, Rob demars, the chief product architect of misfits and machines.

[Rob Demars]

Hello, Elena.

[Alina Jasper]

Hello. We are back with your weekly Nerd Alert. Every week I'll take a deep dive into academic marketing research and translate its complex ideas into simple, understandable language for Rob, and of course, for all of you. Are you ready to nerd out, Rob?

[Rob Demars]

Let's nerd it up.

[Alina Jasper]

All right, let's get into it. As always, we'll link the research we cover in the episode notes. This week I read a study titled Digital versus traditional Advertising and the Recognition of Brand Intangible Assets. This is by Scarlet Xiaotong Song. And this study examines how different advertising channels, traditional online display and paid search impact the recognition and valuation of brand intangible assets during mergers and acquisitions. But before we get too far into things, Rob, question for you. How do you think these channels will stack up? Try to rank them for me, which will help your brand be recognized and remembered. Traditional media, online display, or paid search?

[Rob Demars]

Ooh, good one. Well, I'm gonna have to go with the good old fashioned traditional media when it comes to driving brand value and recognition. You've got a lot of assets there in terms of sound and sight and the power of the traditional media channel that, the reach and the frequency that those offer. I'm gonna go with online display, second, because it can continue to push some of those distinctive brand assets out there because it's just a bit more visual. And then lastly, I'll go with paid search just because it's boring words on a screen.

[Alina Jasper]

Yeah, well, you're actually really right. Yes, it's. Yes, you are. It's kind of a trick question because this surprised me, but traditional media and display were kind of tied.

[Rob Demars]

Oh, really? That would really.

[Alina Jasper]

Which really surprised me too. Wow. So, yeah, I would say you're right. But let's talk about why. So this study, it explores something that's always important, kind of always timely for marketers, which is how do different types of advertising contribute to brand asset recognition, long term brand value, and firm sales? So the study, they look at mergers and acquisitions, which are the ultimate test for a brand's worth, because when one company buys another, they're required to allocate a dollar value to the Intangible assets they're acquiring, like the brand name and these numbers, they're based on legal standards and they have to pass the muster, which I just love that phrase, with accountants, auditors, and even investors. But before we dive into the findings, I wanted to play a quick game. Rob, I'm going to name three major acquisitions and I want you to guess which one had the highest overall brand transaction value.

[Rob Demars]

Oh, boy.

[Alina Jasper]

And I should add, this is not always disclosed. This wasn't a part of the study. This is just for me, for fun. So I can't promise is 100% accurate, but the logic, when it was explained, made some sense to me. All right, so the three are Microsoft's acquisition of Activision Blizzard, Amazon's acquisition of Whole Foods, and Disney's acquisition of 21st Century Fox.

[Rob Demars]

Got it. And so just so I'm clear, we're talking about the brand for Activision. Are you talking about the brand Activision or all the sub brands that Activision owns and the value of those sub brands?

[Alina Jasper]

I mean, I think it's probably. I mean, it's definitely both because you're buying both. But if I were you, I would think more about the sub brands.

[Rob Demars]

Okay.

[Alina Jasper]

That's how the main brand.

[Rob Demars]

All right, then. Well, then I'm going to go with number one being Microsoft's acquisition of Activision, because if I'm, if I remember correctly, titles like Call of Duty fall underneath that and it's just such massive value there. So I'm going to go with what's going on with gaming for number one. Number two, I'm going to go with Disney's acquisition of 21st Century Fox because again, just of all that great content that they have underneath that umbrella. And then third, I'll go with Amazon and Whole Foods.

[Alina Jasper]

All right, so you're almost right. They're very close, but Disney was number one. So that the overall, like, purchase was $71.3 billion when they bought 21st Century Fox. And that brought iconic brands. You're right, it was like the Simpsons, X Men, Avatar that brought them under Disney. Very close. In second was Microsoft and Activision, which was 68.7 billion, which, you're right, included Call of Duty and World of Warcraft. So those were very, very close. And you're right, Amazon and Whole foods is in third. And that transaction was valued at 13.7 billion. Whole Foods already had a presence in the organic and natural foods grocery market before the acquisition. However, hard to compete with the Simpsons.

[Rob Demars]

And call it is. It is. And to be fair, if it was just purely the parent brand, you know, I would have almost flipped it. I would have said, well, Whole Foods as a brand has more value than the brand of Activision. Right. But those titles underneath that are just so meaningful that, yeah, you can, you can. Wow, that's super interesting.

[Alina Jasper]

Right? Yeah, they were really acquiring them for those sub brands more than the overarching brand. But back to the study and the data. Song used a proprietary data set from Kantar. So this data set, it breaks down advertising spend into three categories. Traditional ads like TV and radio, online display like banners and video, and paid search ads like Google search campaigns. And this data spans a decade. It was from 2010 to 2019, and it includes over 2,500 companies. So with that data, the researchers matched the advertising data that they have to 287 completed mergers involving publicly traded companies. And then they manually collected financial information from the acquiring firm's public filings. So the goal was to see what type of advertising was most strongly associated with two outcomes. First, whether the brand was recognized as a separate asset at all, and if so, how much was it valued. So what did they find? Well, first, the study showed that not all advertising is created equally. When it comes to brand building, we're pretty familiar with. Paid search, for example, is great for driving immediate sales. It's highly targeted, tracks consumer behavior, it works deep in the marketing funnel, but it's also short lived. It's designed to nudge you when you're already close to making a purchase, which means it's less likely to build that long term brand equity. On the other hand, traditional advertising and online display work differently. There are more upper funnel channels, so they cast that wide net, create awareness, build positive associations over time. They're also less personalized and harder to measure in the short term. But they're aimed at embedding the brand into our mind, which might explain why they tend to have more staying power. Now here is the kicker. The study revealed that brands that invested more in traditional and online display advertising before being acquired were significantly more likely to have their brand recognized as a standalone asset in the M and A process. And even more impressively, they were also assigned higher dollar values for their intangible brand assets. And that's compared to brands that leaned more heavily on paid search. So essentially, traditional online display, it didn't just help build brand awareness, it literally increased the financial value of the brand in the eyes of investors and accountants. So the takeaway, While it's tempting to pour all your budget into performance driven paid Search campaigns. This study reminds us that those long term brand building channels are important. TV commercials, digital banners and other more broad reach formats. They might not offer that instant gratification of clicks and conversions, but they create a foundation of value that holds up under what really is the ultimate stress test when someone else has to decide what your brand is worth. And now for our robgpt. This study shows that building a valuable brand is like planting a forest. TV and display ads are the tall trees that grow strong over time. A paid search is more like a fast sprouting shrub, quick to show results but not built to last. All right, Rob, what do you think of that one?

[Rob Demars]

I'm surprised, you know, I'm really surprised about display its ability to drive brand. I just didn't, it just, it didn't. It definitely felt better than search, but I wouldn't have put it at the same level as traditional. So that, yeah, that was a surprise to me. It just seems so, you know, traditional ads always seem more, you know, upper funnel but display ads always seem more bottom of the funnel to me. Just their ability to convey brand and they tend to be very offer driven versus things that can really establish brand but they are more visual in nature. So I just. To be at the same level is traditional is surprising to me. But not surprised by paid search being at the bottom.

[Alina Jasper]

Yeah, so I agree. Like when I first read that I was like what the heck's going on? Because we know that display is not as good at building brand as something like tv. So here's what I think happened. I think that first of all display ads, I am more likely to buy into the fact that they're like building my brand and creating some memory associations. If your display ads are really in line with your distinctive assets, your brand than a doctor channel. Because when's the last time you clicked on a display ad? Nobody's really doing that. So I actually buy into it that more than paid search, they're better at building those subconscious brand associations. However, I will also say that. So this is. They're not saying that display and paid search are equal for building brands. They're saying that like they're equal when they're valuing like how much is a brand going to be acquired in a merger or acquisition? Because we know from our own research that when you're ranking brands by like even their, their sales impacts their long term brand effects, TV is going to beat display into the dust. So my theory is that these brands that spend a lot on advertising, that are spending a lot on Traditional ads, they're also just spending a lot on display because why not? Like, you know, like, I think the big brands, they spend just a ton on online advertising. So I. That's my own theory. That's why display ends up being high.

[Rob Demars]

Could it also be the power of retargeting and just their ability for display advertising to follow you around and that just builds that relationship as well?

[Alina Jasper]

Yeah, I think that the study did talk a little bit about that. Display, it is a way to be more personalized so, like, you can be more targeted with who you're getting in front of. So, yeah, I think that could be part of it.

[Rob Demars]

Cool.

[Alina Jasper]

Yeah. I think the takeaway is probably not that display and TV are equal, because I don't think any anyone would agree with that. It's more that investing in advertising that builds your brand is going to do a lot for your company beyond just like, immediate results. It could also help you if you're being acquired. So. But then you could also ask, all right, are these companies being acquired because they spend a lot of traditional advertising, or are they spending a lot on traditional advertising because they're the type of company that would be acquired? Does that make. Does that make sense?

[Rob Demars]

It does, it does, it does.

[Alina Jasper]

That's it for this episode of the Marketing Architects. We'd like to thank Taylor De Los Reyes for producing the show. You can connect with us on LinkedIn and if you like the podcast, please leave us a review. Now go forth and build great market marketing.

[Rob Demars]

Display ads tend to be. I don't know, it just seems more top of funnel to me in terms of lots of hard offers and things like that. Versus.

[Alina Jasper]

You mean bottom of the funnel.

[Rob Demars]

Sorry. Thank you, Marketing Architects.