The amount of time a potential consumer spends watching TV, the number of people watching a particular show, and the demographics of the audience affect TV advertising revenue. Time spent watching TV gives companies more time to sell products, which influences revenue gain. If fewer people are watching TV than Internet videos, the price of advertising goes down, as well as the revenue an advertising company gets by advertising. In addition, the demographic of the audience plays a role in whether the audience will respond positively to an ad. Lastly, advertising companies calculate the cost of ads into their budget.
Time spent watching television affects TV advertising revenue, because more time gives advertisers more chances to sell potential consumers on a product. Some studies show that people are spending more of their time online rather than watching TV. In this case, companies still have a chance to advertise; for example, they could put video ads before Internet videos.
The number of consumers watching a show impacts TV advertising revenue. This is because the number of consumers exposed to advertisements is the maximum number of consumers who can purchase a product or service because of that advertisement. Even if a TV advertisement is very convincing, TV advertising revenue will be limited unless enough people are exposed to it. While the quality of programming has an impact on how many people watch TV, timing is also very key. If enough people are not awake and interested in watching television, it does not matter how good the programming is.
The demographics of people watching television impacts TV advertising revenue. For example, an advertisement targeting middle-aged women may not be very effective if it is shown to people who are watching a prime-time sports event that is not popular among women of that age. Revenue resulting from advertising increases when the people being shown those advertisements are interested in them. Television advertising is most profitable when a large percentage of people watching it decides to purchase a product or service because of it.
To advertise on TV, a company must purchase time on a channel, and the price of an advertising slot often goes up rather than down over time. The popularity of the channel, the time slot of the ad, and the overall demand for that slot are factors that influence the cost. Sometimes the cost of an ad is so great that it is not worth buying because the advertiser cannot afford the cost upfront or does not believe the ad will profit more than the cost of the ad.